BACKGROUND: MED is Like Lumber Liquidators, Except They Sell Food Products
[activistinvesting]
Q2 hedge fund letters, conference, scoops etc
GOTHAM CITY RESEARCH’S OPINIONS:
Last Thursday, we initiated coverage of Medifast (“MED”). The report revealed that MED products contain toxic metals, such as lead and cadmium. Laboratory testing revealed that these MED products contained more lead than peer products, everyday foods, and exceeded regulatory levels.The Company did not dispute any of our findings: that the Optavia products contain toxic metals, the products require independent testing and/or a recall, and that the cause of these quality and safety issues originate from a suspect supply chain.
Medifast (MED): Like Lumber Liquidators, But With Undisclosed Toxic Metals, and A Supply Chain Twist PART I
- 21% to 74% of Optavia products contain contaminants.
- Optavia prices will decline, as prices are 2x-4x more expensive than peers’ products & programs.
- Nearly all Optavia products are not manufactured by the company, contradicting claims otherwise.
- MED will be required to add warning labels to its products.
- MED’s Optavia products (its “Fuelings”) will require recalls and/or third-party testing.
- Shares will decline 62%-86% the current prices
GOTHAM CITY RESEARCH’S OBSERVATIONS:
- 85% of Optavia samples tested by a leading lab exceeded the maximum allowable dose level for lead, per Prop. 65.
- 23% of the Optavia samples tested exceeded FDA maximum daily intake levels for lead.
- The Optavia products we had tested contained higher levels of toxic metals than 93% of 133 best-selling protein powder products tested by the Clean Label Project.
- The average Optavia products tested contain higher lead levels than all 283 everyday foods tested by the FDA.
- A 2008 Lab test detected similar levels of lead in MED products, implying the problem has remained for 10 years.
- Medifast R&D + capex spend as % of revenue is less than half of its peers, suggesting underinvestment.
- A former FDA official informed us that toxic metals in foods is an issue of interest to the FDA, especially when the agency has specific cause for concern.
- MED claims all its powders are made by the company, yet Optavia labels state “manufactured for Optavia”
- Optavia products claim “Made in the USA”, yet we have evidence that the unqualified claim is false.
- The # of FDA citations for Nellson LLC & Hearthside Food solution is very concerning. Both are believed to be among MED’s largest contract manufacturers.
- Optavia diet ranked poorly in the 2018 US NEWS Best Diets Rankings (ranked only 29th of 40).
Article by Gotham City Research LLC
Please read the report to learn more:
Medifast (NASDAQ: MED): Lik… by on Scribd
