Mannatech

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Mannatech Inc.
Type Public (NASDAQMTEX)
Industry Wellness, Personal care,
Multi-level marketing
Founded Coppell, Texas, U.S. (November 1993 (1993-11))
Founder(s) Samuel L. Caster
Headquarters 600 S. Royal Lane, Suite 200, Coppell, Texas, U.S.
Key people Robert Sinnott, CEO
Revenue Decrease US$ 173.447 million (2013)[1]
Operating income Increase US$ -980 thousand (2013)[1]
Net income Increase US$ -1.433 million (2013)[1]
Total assets Decrease US$ 47.560 million (2013)[1]
Total equity Decrease US$ 47.560 million (2013)[1]
Employees 310 (Dec 2013)[1]
Website www.mannatech.com

Mannatech, Incorporated, is a multinational multi-level marketing firm engaged in research, development, and distribution of "glyconutrients," the company's name for blends of plant-sourced saccharides.[2] Mannatech was founded in November 1993 by Samuel L. Caster and is headquartered in Coppell, Texas.[3] It operates in the United States, Canada, Australia, the United Kingdom, Japan, New Zealand, Republic of Korea, Taiwan, Denmark, Germany, Mexico, South Africa, Singapore, Sweden, Norway, Austria, the Netherlands, Ireland, Estonia, Finland and Czech Republic. The company's stock is traded on the NASDAQ exchange under the symbol MTEX. Mannatech employs 310 people and sells its products through approximately 229,000 active independent sales associates.[1] In 2006, Forbes magazine named Mannatech the #5 company on its annual list of the "200 Best Small Companies"[4] and in 2007 Mannatech was ranked 12th in BusinessWeek magazine's 2007 list of America's "Top 100 Hot Growth Small Companies."[5] Mannatech has experienced periods of public scrutiny regarding the efficacy of its products, including a class-action lawsuit in 2005[6] and an attorney general investigation in 2007,[7] but by 2009 the company had settled these issues and restructured its compliance department.[8]

Products[edit]

As of July 2011, the company offered 22 nutritional supplement products, two topical products, five skin care products, and four weight management/physical fitness products. Mannatech is most widely known for Ambrotose, its "glyconutritional" dietary supplement which is a patented blend of plant-sourced saccharides used in its line of Ambrotose products. Glyconutritionals were formulated to support cellular communication by positively impacting human glycoforms, a claim that has generated controversy among some members of the scientific community.[9] In an SEC filing, the company stated that its products "are formulated with predominately [sic] naturally-occurring, plant-derived, carbohydrate-based ingredients that are designed to use nutrients working through normal physiology to help achieve and maintain optimal health and wellness, rather than developing synthetic, carbohydrate-based products, as other companies are doing."[10]

Scientific evaluation[edit]

Independent commentary[edit]

The opinion of independent glycobiologists is that the body cannot digest Ambrotose, as it lacks the enzymes needed.[9] Prominent glycobiologist Dr. Ronald Schnaar, PhD of Johns Hopkins School of Medicine[11] told 20/20 in a June 1, 2007 interview, "All of the sugar building blocks that we need in our body are made from the most common foods we eat."[12]

Hudson Freeze, PhD, leading glycobiologist at the Sanford-Burnham Medical Research Institute[13] said this about glyconutrients: "There are authentic, scientific studies that have looked at people drinking these kinds of materials, and it doesn't really do anything except increase flatulence."[12] Dr. Freeze is a member of the editorial board of Glycobiology, whose current editor-in-chief is Dr. Schnaar.[14] Schnaar and Freeze published a critique of Mannatech's products in Glycobiology in 2008, describing the lack of published clinical benefits of the "partially purified polydisperse plant polysaccharides" found in "Ambrotose Complex."[15]

In Glycobiology, another article described the potential for the public to be misled about the science of glycobiology by the nebulous "glyconutrient" term.[16] The authors' concern was that the public would be susceptible to the "scientific-sounding label" of glyconutrient, which may "generate a feeling of security and credibility...despite the lack of acceptance among many glycobiologists of the term." In November 2007, Science published an article in its "News Focus" section detailing the scientific controversy surrounding Mannatech.[17] It included criticisms and comments from glycobiologists, including Ajit Varki, Raymond Dwek, Gerald Hart, James Paulson, Hudson Freeze, and Ronald Schnaar.

According to the Memorial Sloan–Kettering Cancer Center, Ambrotose has been "promoted aggressively to cancer patients" on the basis that it can help cellular health and boost the immune system, but that "strong scientific evidence to support these claims is lacking".[18]

Company-funded studies[edit]

As stated on Mannatech’s websites, the company has sought expert scientists to conduct pre-clinical and clinical research on the company's products.[19] These studies have reported that the products can: 1) be broken down into smaller, absorbable fragments by GI tract bacteria[20] and 2) modify human serum glycosylation profiles.[21] Additional studies have indicated that the products also exert positive prebiotic effects [22] and positive effects on human brain wave activity,[23] and cognition, mood and memory.[24][25]

In a study published in the International Journal of Food Microbiology in 2010, Drs. Massimo Marzorati and Sam Possemiers (University of Ghent and ProDigest, Ghent, Belgium) and colleagues employed human gastrointestinal tract simulations and microbiological analysis to show that Ambrotose® complex and Advanced Ambrotose® powder exerted positive prebiotic effects. Both products exhibited quality selective fermentability throughout the entire colon with a positive and selective bifidus factor. They also demonstrated the possibility of enhancing species belonging to Bacteroidetes, a phylum recently associated with body weight management.[22]

In a five-week combined Phase 1 and 2 open label, forced titration dose response study of 21 healthy adults, physicians and scientists from Southern Cross University showed that the Ambrotose AO dietary supplement was safe and raised serum Oxygen Radical Absorbance Capacity (ORAC) by 36.6%. The study was published in BMC Complementary and Alternative Medicine. In a subsequent 21-day randomized, double-blind, placebo-controlled crossover trial of 25 healthy adults, scientists from the University of Memphis showed that Ambrotose AO capsules significantly increased two measures of antioxidant capacity in the blood: ORAC and Trolox Equivalent Antioxidant Capacity (TEAC).[26]

Two clinical trials (one conducted in the U.S. and one in Australia) investigated the effect of Ambrotose complex on brain function. Drs. Atiya N. Stancil and Leslie H. Hicks of Howard University conducted a randomized, double-blind, placebo-controlled study of Ambrotose in 62 healthy young adults. It was reported that a single one-tablespoon serving of Ambrotose complex significantly improved visual discrimination and working memory.[24] A trial in 109 healthy middle-aged adults conducted by Dr. Talitha Best (a Mannatech-funded researcher)[27] and colleagues from Flinders University showed that Ambrotose complex powder (4 grams/day for 12 weeks) significantly improved memory and psychological well-being.[25]

Public Scrutiny[edit]

Securities Exchange Act class-action lawsuit[edit]

The company has been known for its literature, websites, and multi-level marketing with claims of scientific links to cellular glycobiology long disputed by the relevant individual Nobel prize winners.[28] On September 9, 2005 a class-action lawsuit was filed against Mannatech for alleged violations of the Securities Exchange Act. The plaintiff class accused Mannatech of violating the act by "issuing a series of material misrepresentations"; specifically: failing to control its sales associates and allowing them to make false claims concerning the efficacy of Mannatech products. This caused a misleading price inflation of the company's stock.[29] The plaintiffs consisted of the purchasers of Mannatech stock during the period August 10, 2004 through July 30, 2007.[6]

On March 20, 2008, Mannatech settled the class-action lawsuit by agreeing to pay $11.25 million to the plaintiff class. As part of the settlement, Mannatech admitted no wrongdoing.[30]

Texas Attorney General civil complaint[edit]

Mannatech came under investigation by the Texas Attorney General on October 27, 2006 for alleged violations of that state's Deceptive Trade Practices Act.[31] In response to this criticism, Mannatech's founder and chief executive officer at the time, Samuel L. Caster, offered his view: "We walk the fine line of always stating our case appropriately and always training our people: We're not into the treatment, cure or mitigation of disease. We're into the improvement of quality of life. Now, who can benefit from good nutrition? Sick people, well people, everybody. Everybody benefits from good nutrition."[31] On July 5, 2007, Texas Attorney General Greg Abbott formally charged Mannatech, Sam Caster, and several related entities with operating an illegal marketing scheme in violation of state law. A press release stated, "Today's enforcement action stems from a large-scale investigation by state authorities, who examined Mannatech's dubious claims about the health benefits of its products."[7] In response to the civil complaint, Mannatech expanded its compliance department and began to provide periodic reports to the Attorney General's office to ensure that the marketing efforts of its affiliate network adhere to appropriate guidelines.[32]

Mannatech settled the civil complaint on February 26, 2009 by agreeing to pay $4 million in restitution to clients who purchased products and $2 million to the state to cover its costs in the case. In addition, Sam Caster agreed to pay a $1 million civil penalty and steer clear of any type of leadership position or employment relationship with Mannatech for five years.[33][34] When discussing the settlement at a news conference, Abbot stated, "Bottom line, this is a warning to the general public: Be wary of phony claims of magic cure-all pills or false hope in a bottle. You could be duped into purchasing something that has no real effect and no real value."[35] Mannatech did not admit wrongdoing; settling was easier than debating Abbott, according to then-CEO Wayne Badovinus. "If they do it again, we will ensure they get put out of business," Abbott said.[36]

One year later, Mannatech Co-CEO Robert Sinnott reflected on the ramifications of the legal action, saying, "The civil action related mainly to some actions by our salesforce. We were embarrassed and also financially impacted by the attorney general suit. We learned from that chapter and it is closed. We've reached a settlement and we've paid the fees associated with it. We've done everything in our power to correct that and make sure we're in compliance in the future."[8]

ABC investigation[edit]

A 20/20 undercover investigation that aired June 1, 2007 on ABC Television showed Mannatech's sales associates teaching sales recruits how to target Mannatech products to patients with specific illnesses in a manner that purportedly does not violate U.S. federal law, including U.S. Food and Drug Administration regulations, by avoiding direct claims that the products cure any particular diseases.[12] Mannatech CEO Sam Caster was interviewed for the show and told 20/20 that Mannatech makes no specific health claims about its products. "I don't think dietary supplements treat, cure, mitigate anything. It is not meant to substitute a doctor's oversight, but it plays an important role in the whole health equation."[12]

Company losses[edit]

Mannatech announced in August 2007 that company founder Sam Caster was stepping down as CEO of Mannatech,[37] to be replaced by Wayne Badovinus as the new chief executive. Several corporate initiates were undertaken, but after 17 months on the job Badovinus resigned in December 2009.[38] His efforts had not met the performance expectations of the board of directors.[39] Another member of the board resigned shortly after.[40] Mannatech's Chief Science Officer Dr. Robert Sinnott and Mannatech's Chief Financial Officer Steve Fenstermacher were named Co-CEOs.[41] Fenstermacher later resigned.[42]

Publicity over the company's lawsuits began to damage the balance sheets and stock performance.[38] After profits of $32 million in 2006 and $6.6 million in 2007, Mannatech reported a $12.6 million loss in 2008 and a $17.3 million loss in 2009.[43] By mid-year 2010, one quarter of Mannatech's sales were gone.[43] 2010 losses were $10.6 million.[44] As the company's market capitalizations continued to fall, S&P Indices dropped it from the S&P 600 Index, stating "They are no longer representative of the small cap market space."[45] Recruiting efforts continued dropping in 2011, widening company losses to 20.6 million.[46]

Sam Caster[edit]

Prior to Mannatech[edit]

Samuel L. Caster, founder and former Chairman of the Board of Directors of Mannatech, Incorporated, was an entrepreneur in other lines of business and was part of other organizations prior to Mannatech.[47][48]

Sam Caster is an early cast member of Up With People, a motivational organization and musical performance troupe. The Up With People International Alumni Association has recognized Caster as an alumnus who exhibits leadership, intercultural understanding, and humanitarian outreach.[49]

Sam Caster's first major business venture, Eagle Shield, was an insulation product that claimed to utilize new technology developed by NASA and could reduce heating and cooling costs by up to 40%. The Attorney General of Texas concluded that the product's technology long predated NASA and did not reduce consumers' bills in the amounts advertised.[47][48]

Caster's second product, the "Electrocat," was sold as a pest control device. The Electrocat reportedly emitted pulsed vibrations that repelled rats, crickets, snakes, ticks, spiders, mosquitoes, and scorpions. However, in January 1991, the Attorney General of Texas investigated the product and found that the Electrocat emitted no vibrations whatsoever. The Attorney General declared, "The device is a hoax, and stands on the same scientific footing as a perpetual motion machine."[47][48]

Mannatech's inception[edit]

Caster then started Mannatech in 1994, coinciding with Congress' passage of the Dietary Supplement Health and Education Act of 1994, which made profitable marketing of a wider spectrum of dietary supplements a possibility. His new company quickly became a success. Caster's wife Linda later wrote and released a book titled Undeniable Destiny, in which she refers to Mannatech as a "Joseph company," based on Joseph in the Bible, who, as she noted in her book, had a divinely inspired destiny to fulfill.

Consultant to Mannatech[edit]

On August 22, 2007, Sam Caster resigned as CEO of Mannatech.[37] The Wall Street Journal reported: "Mr. Caster suggested his own resignation so he could focus on company marketing, said (Mannatech board member) Mr. Larry A. Jobe. Mr. Jobe said the board wasn't displeased with Mr. Caster, but that the lawsuits gave members 'a lot of concern.'" Paperwork filed with the SEC indicate disagreements between Caster and the board of directors were the reason for Caster's resignation.[50]

On October 19, 2007, it was reported that Mannatech Inc. had fired Grant Thornton LLP as its auditor after the accounting firm demanded that Mannatech remove Sam Caster from all responsibilities.[51]

Sam Caster was barred by the attorney general of Texas from serving as a director, officer, or employee of Mannatech for five years—from February, 2009 until February, 2014.[47] Caster was also barred from taking a role in any other multi-level marketing programs during that time. Despite this, then-CEO Wayne Badovinus stated Caster would work as a consultant answering directly to him.[35] The attorney general’s office agreed Caster could serve as an outside consultant to the company.[47]

In March, 2014, Caster appeared as main speaker at a Mannatech videoconference event with sales associates for the company's new skin rejuvenation product. Introduced as the company’s founder and "visionary," he explained the company’s new product and his role in its creation. "Oh my gosh, This stuff really works." he said, of the product. "No one could have predicted it would have that immediate an impact."[47]

MannaRelief Ministries[edit]

In 1999, Sam Caster and his wife Linda founded MannaRelief Ministries, a non-profit organization that provides nutraceuticals to orphanages.[52]

See also[edit]

Citations and footnotes[edit]

  1. ^ a b c d e f g "Mannatech / United States Securities and Exchange Commission Form 10-K". United States Securities and Exchange Commission. Retrieved 29 April 2013. 
  2. ^ "Glyconutrients". Memorial Sloan-Kettering Cancer Center. October 11, 2012. Retrieved 2013-08-31. 
  3. ^ "Mannatech, Inc.". Mannatech, Inc. Retrieved 2007-07-08. 
  4. ^ "The 200 Best Small Companies". Forbes. October 12, 2006. Retrieved November 18, 2009. 
  5. ^ "Hot Growth Companies: The Fastest-Growing Companies of 2007". BusinessWeek. May 2007. Retrieved November 21, 2009. 
  6. ^ a b "Milberg Weiss Announces the Filing of a Class Action Lawsuit Against Mannatech, Inc.". All Business. September 12, 2005. Retrieved May 27, 2009. 
  7. ^ a b "Texas Attorney General Charges Mannatech with Unlawful, Misleading Sales Practices". Texas Attorney General Greg Abbott. July 5, 2007. Retrieved 2007-07-08. 
  8. ^ a b "Mannafest Destiny". Direct Selling News. February 2010. Retrieved Feb 25, 2010. 
  9. ^ a b Sataline, Suzanne (May 11, 2007). "Health Claims by Sales Force Boost Supplement Firm; Mannatech's Products Attract the Gravely Ill; Disclaimers on Labels". The Wall Street Journal. Retrieved July 8, 2007. "Some researchers say they doubt that Ambrotose offers any health benefits. Dr. Hudson Freeze, who studies complex carbohydrates as a professor of glycobiology at the Burnham Institute for Medical Research in La Jolla, Calif., contends the body can't digest Ambrotose because humans lack the enzymes necessary to break down the plant fibers it contains into simple sugars." (subscription required)
  10. ^ Mannatech, Incorporated (March 16, 2006). "Form Mannatech, Incorporated: 10K SEC Public Filing for FY 2005". United States Securities and Exchange Commission. Retrieved May 23, 2010. 
  11. ^ "Ronald L. Schnaar, PhD". Johns Hopkins University. Retrieved May 21, 2010. 
  12. ^ a b c d Avila, Jim; Geoff Martz; Andrew Paparella (June 1, 2007). "Cure for Your Disease or Empty Promise?". ABCNews Internet Ventures. Retrieved July 8, 2007. 
  13. ^ "Hudson Freeze, PhD". Sanford-Burnham Medical Research Institute. Retrieved May 21, 2010. 
  14. ^ Editorial Board. Glycobiology. Retrieved May 21, 2010. 
  15. ^ Schnaar RL, Freeze HH (2008). "A "Glyconutrient Sham"" (PDF). Glycobiology 18 (9): 652–657. doi:10.1093/glycob/cwm098. PMID 17855741. 
  16. ^ Torok CB, Murray TH (2008). "Wielding the sword of professional ethics against misleading dietary supplement claims". Glycobiology 18 (9): 660–663. doi:10.1093/glycob/cwn060. 
  17. ^ Jocelyn Kaiser (2007). "Who Owns Glycobiology?". Science 318 (5851): 734–737. doi:10.1126/science.318.5851.734. PMID 17975043. 
  18. ^ "Glyconutrients". Memorial Sloan–Kettering Cancer Center. 11 October 2012. Retrieved August 2013. 
  19. ^ "Publications". Mannatech, Inc. Retrieved March 18, 2012. "(Article acknowledges studies that received at least partial funding)" 
  20. ^ Sinnott, RA; Ramberg J, Kirchner JM et al. (2007). "Utilization of arabinogalactan, aloe vera gel polysaccharides, and a mixed saccharide dietary supplement by human colonic bacteria in vitro". Int J Probiotics Prebiotics 2: 97–104. 
  21. ^ Alavi, A; Fraser O; Tarelli E; Bland M; Axford J (2011). "An open-label dosing study to evaluate the safety and effects of a dietary plant-derived polysaccharide supplement on the N-glycosylation status of serum glycoproteins in healthy subjects". Eur J Clin Nutr 65 (5): 648–656. doi:10.1038/ejcn.2010.263. PMC 3087895. PMID 21224866. 
  22. ^ a b Marzorati, M; Verhelst A, Luta G et al. (2010). "In vitro modulation of the human gastrointestinal microbial community by plant-derived polysaccharide-rich dietary supplements". Int J Food Microbiology 139 (3): 168–76. doi:10.1016/j.ijfoodmicro.2010.02.030. PMID 20362351. Retrieved 19 July 2011. 
  23. ^ Wang, C; Szabo JS; Dykman RA (2004). "Effects of a carbohydrate supplement on resting brain activity". Integrative Physiol & Behavioral Sci 39 (2): 126–138. doi:10.1007/BF02734278. 
  24. ^ a b Stancil AN, Hicks LH (2009). "Glyconutrients and perception, cognition, and memory". Percep Motor Skills 108 (1): 259–270. doi:10.2466/PMS.108.1.259-270. PMID 19425467. 
  25. ^ a b Best, T; Kemps E. Bryan J (2010). "Saccharide effects on cognition and well-being in middle-aged adults: A randomized controlled trial". Developmental Neuropsych 35 (1): 66–80. doi:10.1080/87565640903325709. 
  26. ^ Bloomer, RJ; Canale RE; Blankenship MM; Fisher-Wellman KH (2010). "Effect of Ambrotose AO on resting and exercise-induced antioxidant capacity and oxidative stress in healthy adults". NutrJ 9 (49): 1–17. 
  27. ^ "Press Release: Australian Scientist wins Researchers in Business Project Funding". Mannatech, Inc. October 31, 2011. Retrieved March 18, 2011. 
  28. ^ "Nobel Prize winners say sites falsely cite research". Fort Worth Star-Telegram. September 11, 2006. 
  29. ^ "Lerach Coughlin Announces Class Action Lawsuit Against Mannatech, Inc". Aug 30, 2005. Retrieved Jul 16, 2013. 
  30. ^ "Mannatech Reaches Settlement in Securities Class-Action Lawsuit". All Business. March 20, 2008. Retrieved May 27, 2009. 
  31. ^ a b Greenberg, Herb (October 27, 2006). "Texas Attorney General probing Mannatech". MarketWatch, Inc. Retrieved 2007-07-08. 
  32. ^ "Mannatech Reaches Settlement with Texas Attorney General". AOL Finance. February 26, 2009. Retrieved May 27, 2009. 
  33. ^ "Mannatech Settles with Attorney General". Dallas Business Journal. February 26, 2009. Retrieved February 26, 2009. 
  34. ^ "Texas Attorney General Abbott Reaches Agreement To Halt Deceptive Trade Practices". Attorney General of Texas Greg Abbott. February 26, 2009. Retrieved 2013-08-31. 
  35. ^ a b "Coppell-Based Mannatech to Pay Millions to Settle Diet-Supplement Lawsuit". Ft. Worth Star Telegram. February 26, 2009. Retrieved February 26, 2009. 
  36. ^ "Mannatech, former CEO settle with state". Dallas Morning News. February 26, 2009. Retrieved February 26, 2009. 
  37. ^ a b Sataline S (August 22, 2007). "Caster Resigns as CEO of Mannatech". The Wall Street Journal. Retrieved 2008-04-06. 
  38. ^ a b Roberson, Jason (2009-12-04). "Mannatech CEO quits after 17 months on the job". Dallas Morning News. Retrieved 2009-12-27. 
  39. ^ "Exhibit to SEC Form 8-K Mannatech Inc. Resignation Letter of Mr. Wayne Badovinus". FAQs.org Internet FAQ Archive. 2009-11-30. Retrieved 2009-12-27. 
  40. ^ "Mannatech Announces Board Resignation". Yahoo Finance. 2009-12-24. Retrieved 2009-12-27. 
  41. ^ David M. Blitzer, Ph.D., Managing Director & Chairman of the Index Committee (2009-12-03). "Mannatech (MTEX) CEO Badovinus Resigns". Retrieved 2010-11-28. 
  42. ^ "Mannatech announces the resignation of co-CEO, CFO Stephen Fenstermacher". 2011-12-16. Retrieved 2012-05-21. 
  43. ^ a b Dallas Business Journal (2010-08-04). "Mannatech’s profit narrows net loss, sales decline". Retrieved 2010-08-12. 
  44. ^ "MANNATECH INC 2010 Annual Report - Form 10-K - March 10, 2011." (PDF). secdatabase.com. Retrieved 2012-05-15. 
  45. ^ David M. Blitzer, Ph.D., Managing Director & Chairman of the Index Committee (2010-11-26). "Standard & Poor’s Announces Changes to U.S. Index" (PDF). The McGraw Hill Companies. Retrieved 2010-11-26. 
  46. ^ Press Release (2012-03-28). "Mannatech Reports Fourth Quarter And Year End Results". Business Wire. Retrieved 2012-04-01. 
  47. ^ a b c d e f Lieber, Dave (23 November 2013). "Mannatech founder, banned from company, still works from inside". Dallas Morning News. Retrieved 3 March 2014. 
  48. ^ a b c Brammer, Rhonda (May 9, 2005). "Manna from Texas" (PDF). Barron's Online / Dow Jones & Company, Inc. Retrieved 2007-07-08.  Reproduced on this website. Original article available on Barron's website [1] only for Barron's Online subscribers.
  49. ^ "MannaRelief Ministries Founder Receives International Award" (Press release). P.R. Newswire. March 8, 2006. Retrieved 2009-07-31. 
  50. ^ "SEC Form 8-K Mannatech Inc. Item 6. Resignation of Registrant's Director". SEC Info. 2000-05-12. Retrieved 2009-12-27. 
  51. ^ Sataline S (October 19, 2007). "Mannatech Fires Its Auditor Amid Dispute Over Founder". The Wall Street Journal. Retrieved 2008-04-06. (subscription required)
  52. ^ "IRS Form 990 (2007): MannaRelief Ministries" (PDF). Guidestar.org. Retrieved January 1, 2012. 

External links[edit]