News Category: Uncategorized

Josh Long | Jul 27, 2020

Editor’s note: This is part two of a four-part series of articles on FDA enforcement of the new dietary ingredient notification requirement in U.S. law. Part one can be read here.

On the evening of Feb. 26, 2019, Mark LeDoux, the founder of Natural Alternatives International Inc. (NAI), sent an optimistic email to some colleagues after meeting with FDA officials. Just weeks earlier, NAI—a nutritional supplements maker in Carlsbad, California—received word that FDA had acknowledged its safety-related notice for a new dietary ingredient (NDI) manufactured in Japan, CarnoSyn beta-alanine.

Editor’s note: This is part two of a four-part series of articles on FDA enforcement of the new dietary ingredient notification requirement in U.S. law. Part one can be read here.

On the evening of Feb. 26, 2019, Mark LeDoux, the founder of Natural Alternatives International Inc. (NAI), sent an optimistic email to some colleagues after meeting with FDA officials. Just weeks earlier, NAI—a nutritional supplements maker in Carlsbad, California—received word that FDA had acknowledged its safety-related notice for a new dietary ingredient (NDI) manufactured in Japan, CarnoSyn beta-alanine.

It took NAI nearly a year to compile all the information for its beta-alanine NDI notification (NDIN) to FDA—with hundreds of pages of documents describing such matters as testing, manufacturing methods and safety, LeDoux explained in an interview. NAI spent a minimum of around $1 million investing in the NDIN process, and the figure is more than twice that amount when including human clinical trials to support components of the submission, he reported in a follow-up email.

During the Feb. 26 meeting with FDA officials, LeDoux turned his attention to rival forms of beta-alanine. It would not be the last time NAI complained to FDA that beta-alanine coming into the U.S. from China was “adulterated” and possibly dangerous to consumers. Over a period of more than a year, NAI and its advocates communicated with FDA employees—including Steven Tave, director of the Office of Dietary Supplement Programs (ODSP)—through emails, phone calls and in-person meetings.

NAI believed it was making headway with FDA, its representatives suggested in emails following meetings with the agency. In recent months, though, FDA has declined requests for additional meetings by the head of a trade group with close ties to LeDoux, and the agency has not issued an import alert for “generic beta-alanine,” as NAI requested. FDA representatives suggested in an email and interviews that the agency was not provided sufficient evidence to justify enforcement action against the ingredients flagged by NAI.

This article highlights the substance of NAI’s pleas to FDA, points at which NAI’s advocates seemed encouraged by meetings with agency officials, and the conclusions of the two parties following more than a year of back-and-forth conversations.

2019 Meetings

On Feb. 1, 2019, FDA advised NAI’s outside counsel, Kevin Bell, that it filed NAI’s NDIN for CarnoSyn beta-alanine. The acknowledgement letter was welcome news for NAI, reflecting the culmination of a substantial investment and confirmation that the company had satisfied a requirement in the law to establish a supplement containing an NDI “will reasonably be expected to be safe.”

Twenty-five days later, LeDoux—chairman and CEO of NAI—met with FDA officials, including Tave. The objective, he recalled for this story, was “to discuss policing those products that were piggybacking on our successful NDI to import their beta-alanine without submitting safety or process data.”

The meeting had been productive, LeDoux suggested to Corey Hilmas, a medical doctor and former FDA official working for the Natural Products Association (NPA), in a Feb. 26, 2019 email sent that evening.

“I think we set the table for some productive outcomes based on relationship and the mutual recognition that FDA needs a quid-pro-quo for the NDI in order to establish the intrinsic commercial value of the undertaking for those companies that want to play by the rules,” LeDoux, who chairs NPA’s board of directors, wrote to Hilmas, according to a partially redacted email Natural Products Insider obtained from Bell, a partner in Washington, D.C., with the law firm Arnall Golden Gregory LLP (AGG).

Hilmas, who now works for KGK Science and was not immediately available to comment for this story, also attended the meeting.

In an earlier email that day to LeDoux, Hilmas indicated FDA expressed interest in the men drafting an import alert—which authorizes the detention of products (that appear to violate the law) at U.S. ports without physical examination—to support an adulteration charge. “Dan and I can work on that,” Hilmas said, referring to Dan Fabricant, president and CEO of NPA, who previously oversaw FDA’s Division of Dietary Supplement Programs.

That spring, LeDoux capitalized on another opportunity to discuss NDIs at a public meeting hosted by FDA, “Responsible Innovation in Dietary Supplements.”

During the May 16, 2019 meeting, Tave reminded industry that “an effective NDI notification process represents FDA’s only opportunity to evaluate the safety of a new dietary ingredient before it becomes available to consumers.”

FDA’s “goal overall is not to [maximize] the number of notifications that we receive,” he said, according to a transcript of the meeting. “Rather, our goal is to right-size the process to see that appropriate notifications are submitted for the products for which they are required.”

Several people from industry spoke during the meeting, including LeDoux, who said his company “spent millions of dollars” and entered FDA’s “front door” by submitting an NDIN.

“Filing an NDI notification should not be considered too difficult; however, spending those kinds of resources as either a private or public company begs the question, ‘We’re a good citizen; now what?’” he stated.

“So by helping the government do its job, which is to promote the safety of consumer products in our space, we’re looking at ways to work together with the agency to arrest those products that are in commerce that I believe are deficient in not only scope, content, but are, in fact, per se, adulterated because they have not gone through the front door of the FDA,” LeDoux said.

NAI and its advocates would reiterate this ‘adulteration’ theme in various correspondence with FDA. In support of their requests that FDA take enforcement action against beta-alanine, Bell and Fabricant provided records to FDA pertaining to the ingredient.

A month after the public meeting, Bell and Fabricant met again with FDA officials, providing “extensive data regarding imports of beta-alanine” between 2017 and May 2019, according to a timeline of events Bell prepared for this story. During the June 14 meeting, FDA was asked to take action against entities violating the law, based on NAI’s NDIN.

Bell and Fabricant made clear the “entire industry was taking a ‘wait and see’ approach on buying CarnoSyn to see if the FDA was going to do anything,” Bell shared via email, in what he said reflected excerpts from a summary of the meeting. “If the FDA would take action, we believed it would have widespread effect on companies’ actions in being compliant.”

Later that year, in an email sent Oct. 4, 2019 to Tave and another ODSP employee, Sibyl Swift—now NPA’s senior vice president of scientific and regulatory affairs—Fabricant attached an excel spreadsheet of 10 supplement brands marketing beta-alanine and the beta-alanine products for each of the brands: Iovate, ProSupps, Redcon1, JNX Sports, MusclePharm, GHOST Lifestyle, Bulk Supplements, Old School Labs, Vital Pharmaceuticals and Bucked up.

Six of the companies began licensing CarnoSyn beta-alanine in either 2015, 2016 or 2017, though the last purchase by any of them (MusclePharm) was in March 2019, according to Bell. None of the brands responded to requests to comment for this story, whether on their legal basis for marketing beta-alanine in the U.S., or their reaction to NAI’s requests that FDA target for enforcement action beta-alanine that hasn’t been the subject of an NDIN.

Also on Oct. 4, 2019, in a separate email addressed to Frank Yiannas, FDA deputy commissioner for Food Policy and Response, Fabricant requested a meeting “to discuss the absence of enforcement on imported new dietary ingredients, which have failed to file an NDI notification.” He advised FDA of an upcoming trade show (SupplySide West), where “the show floor is filled with imported knockoffs of NDIs.”

“No one at FDA has seen the specifications behind such products or the underlying safety data as is required by statute,” he wrote in the email, which also was sent to other FDA employees, including ODSP officials and Douglas Stearn, deputy director for regulatory affairs with the Center for Food Safety and Applied Nutrition (CFSAN).

“This creates a completely unbalanced playing field, effectively sending the message to U.S. companies that successfully submit an NDI that the agency is fine with someone claiming to have the exact same material as a company that submitted, without any evidence to show on that front.”

Four days later in an email to Yiannas, Fabricant attached for FDA’s consideration a draft import alert/bulletin for beta-alanine coming into the U.S. without an NDIN. It essentially proposed detaining products and bulk dietary ingredients containing beta-alanine that hadn’t been subject to an NDIN.

On Dec. 17, 2019, at FDA’s campus in White Oak, Maryland, Bell and Fabricant met again with FDA officials to discuss NDI enforcement. According to the two men, Yiannas appeared by phone while several officials appeared in person, including Stearn, Tave and Cara Welch, now deputy director of ODSP, who prior to her tenure at FDA worked at NPA. Also present, according to Bell and Fabricant, was a representative of Lonza, the multinational company with a specialty ingredients segment. Melanie Disa, a spokesperson for Lonza, did not respond to multiple requests for an interview to comment on NDIs.

The conversation related to the broader issue of import alerts, as well as specific companies and NDIs including beta-alanine, Bell and Fabricant confirmed.

While FDA officials expressed interest in the issues, “Steve Tave told us to be patient,” Fabricant said. “We had been sending information for over a year specific to the beta-alanine issue and longer than that in a broader context. I think we had demonstrated we had been plenty patient.”

Dan Fabricant, the president and CEO of the Natural Products Association, met with FDA officials in December 2019 to discuss new dietary ingredients—including beta-alanine—being imported into the U.S. whose evidence of safety hasn’t been reviewed by FDA. Fabricant said he was joined at the meeting by Kevin Bell, outside counsel to NPA, as well as a representative of Lonza.

Fabricant followed up again with Yiannas on Jan. 8, and though the holiday season had recently ended, he said he “didn’t want to lose any momentum on our [December 2019] meeting and addressing the import issue of adulterated NDIs.”

“Does it make sense to have a follow-up meeting or phone call in early/mid-February on the matter?” Fabricant asked by email. “In the interim, if there’s anything needed from us, please let us know what we can do on our end.”

The next day, Tave advised Fabricant he was responding on Yiannas’ behalf. “At this point, we don’t think it makes sense to schedule a follow-up meeting or phone call yet,” he wrote in an email. “We will not hesitate to reach out to you if we have any questions or need any additional information. We very much appreciate your collaboration on this important issue.”

On Feb. 24, Bell sent Tave an eight-page letter, requesting FDA enforce against “adulterated” beta-alanine being imported into the U.S. The letter also included two attachments: FDA’s Feb. 1, 2019 letter to Bell, acknowledging NAI’s NDIN for CarnoSyn beta-alanine; and a list of 24 Chinese manufacturers and exporters of beta-alanine, which identified their addresses, websites, kilograms of beta-alanine exported to the U.S. and total shipments between Feb. 1, 2019 and Jan. 31, 2020.

“Despite being a responsible stakeholder in the dietary supplement industry for over 40 years, since receiving its AKL [acknowledgement without objection] letter from FDA, NAI continues to be negatively impacted by scofflaws exporting adulterated, generic forms of beta-alanine to the U.S. and FDA’s lack of enforcement of NDIN requirements,” Bell wrote to Tave.

Fabricant followed up again in May with Yiannas concerning “adulterated imported ingredients,” requesting a teleconference to discuss “next steps.” He also expressed interest in exploring what FDA actions would result from the May 2019 public meeting.

Nina Zimdahl, special assistant to Yiannas, responded Yiannas was “primarily focused on COVID-19” and could not meet at the time. She said FDA would “be in touch when the public health emergency subsides if we have any questions for you on this issue or we have more to share with you on NDIs and imports.”

In a June 8 email to FDA officials, Fabricant forwarded them an email sent to LeDoux about a company in China selling beta-alanine.

“It’s clear from the thread that this company is currently selling their adulterated ingredient made with ‘advanced enzyme catalysis, metabolic engineering and biological fermentation technology,’” Fabricant wrote, suggesting such “chemical changes” would require an NDIN based on draft guidance published by FDA in 2016.

Tave thanked him for sharing the information with his agency. Fabricant confirmed this was his most recent correspondence with FDA regarding beta-alanine.

‘Just a Ruse’

Bell is disappointed FDA has not taken enforcement action against beta-alanine, despite all the conversations and records shared with the agency.

“We were made to believe that Director Tave and other senior FDA officials wanted to move forward on several forms of NDI enforcement,” the lawyer said in an email. “That apparently was just a ruse.”

Tave, FDA’s supplements chief, expressed a considerably different perspective. While he acknowledged NAI and its advocates provided many records to FDA, he maintained the information shared with the agency was not tied to violations of law.

“We met with them multiple times whenever they asked to meet,” he said in an interview. “We reviewed what they sent whenever they asked us to review something, but we don’t have the capacity to do their job.”

Source: Natural Products Insider

This series of articles highlights a lingering—and perhaps growing—rift between FDA and some factions of industry over enforcement of a provision in a 26-year-old law intended to flag novel ingredients in supplements before they pose risks to consumers.

Josh Long | Jul 20, 2020

Editor’s note: This is part one of a four-part series of articles on FDA enforcement of the new dietary ingredient notification requirement in U.S. law. 

On Aug. 7, 2019, a former regulator who leads a dietary supplement trade group in Washington, D.C., emailed three FDA officials, attaching a document that acknowledged receipt of a shipment of beta-alanine from China. The shipment’s consignee, or U.S. entity responsible for its receipt, was Armada Nutrition, a contract manufacturer in Spring Hill, Tennessee, that makes multi-ingredient powder solutions for nutrition brands.

The attachment was merely one document in a mountain of records shared with FDA that identified Chinese exporters of beta-alanine to the U.S. and American companies accepting the shipments, or U.S. supplement brands marketing the ingredient, an amino acid widely used in sports nutrition products.

Dan Fabricant, president and CEO of the Natural Products Association (NPA), and Kevin Bell, outside counsel to NPA, peppered FDA with documents in emails and during meetings over a period of more than a year. One of their chief objectives was to persuade the agency to detain U.S.-bound shipments of beta-alanine from China that had not gone through a premarket safety review by FDA. To date, their coordinated and extensive efforts have not resulted in an FDA import alert against forms of beta-alanine made in China that compete with one of Bell’s clients—Natural Alternatives International Inc. (NAI), whose founder, Mark LeDoux, chairs NPA’s board of directors.

‘Fundamental problem here’

This series of articles highlights a lingering—and perhaps growing—rift between FDA and some factions of industry over enforcement of a provision in a 26-year-old law intended to flag novel ingredients in supplements before they pose risks to consumers. Industry lawyers, former FDA officials and business executives suggested NAI’s pleas reflect an agency reticent to enforce a key requirement in the Dietary Supplement Health and Education Act of 1994 (DSHEA), even when FDA is spoon-fed evidence that an ingredient may be adulterated.

At issue: The new dietary ingredient notification (NDIN) requirement, widely considered to be underutilized either intentionally or negligently, or through a “present in the food supply” exemption in the law that contributes to FDA’s challenges in assessing novel ingredients in supplements. Lindsay Haake, an FDA spokesperson, said in a July 9 email that the Office of Dietary Supplement Programs (ODSP) has received approximately 1,140 NDINs since the program’s inception.

Considering the sheer size of the industry, the math doesn’t seem to add up. Nutrition Business Journal (NBJ), a publication owned by Informa, projects 2020 sales of dietary supplements to reach US$54.5 billion with growth of 12.1%, and FDA has estimated the market contains as many as 80,000 dietary supplement products.

“There’s a fundamental concern here,” said LeDoux, chairman and CEO of NAI, a publicly traded company in Carlsbad, California. “Either the system is broken or it’s unenforceable. And if it’s unenforceable, then it needs to be fixed legislatively and/or administratively. It begs the question: Why would you file an NDI if the agency isn’t going to protect your efforts?”

An import alert, which NAI requested, could further its commercial interests. If FDA choked off the supply of beta-alanine coming into the U.S. from China, U.S. brands marketing beta-alanine in their nutritional products are more likely to license NAI’s CarnoSyn beta-alanine, which is sourced from a manufacturer in Japan.

Bell, Fabricant and LeDoux stressed FDA enforcement action would promote its central mission of protecting the public health. NAI in 2018 submitted to FDA an NDIN for CarnoSyn beta-alanine, which disclosed manufacturing details and other data upon which the agency could assess the safety of the ingredient. By contrast, FDA has no way of knowing, for example, whether the processes used to manufacture beta-alanine in China are safe, the three men said in interviews.

“If other people are just going to copy you and not even bother to file, how does that help not only American business but the American consumer to know what they’re getting is safe?” LeDoux asked.

The issue of NDI enforcement is a challenging one; FDA bears the burden of proving an ingredient is “adulterated,” and NAI and its advocates did not provide evidence to establish beta-alanine coming from China is unlawful, according to FDA representatives in an email and two interviews.

Among FDA’s observations, an NDI is exempt from the notification requirement if—per Section 413(a)(1) of DSHEA—it’s “been present in the food supply as an article used for food in a form in which the food has not been chemically altered.” The NDIN “requirement exists except for where it doesn’t,” Steven Tave, director of FDA’s ODSP, said in an interview.

And in an emailed response to questions, FDA said through a spokesperson that some stakeholders take the view that “once an NDI has been the subject of one NDI notification and introduced to the market, other products containing that ingredient are excepted from the notification requirement.”

CarnoSyn beta-alanine

LeDoux founded NAI 40 years ago out of his home in San Marcos, California, when he was 25 years old. A prominent figure in the industry, he serves as chairman of NPA’s board and speaks at industry events.

LeDoux shared that in 1986 the private company went public through a reverse merger acquisition when the prime rate—the rate banks use as a basis to set loans—exceeded 15%. NAI (Nasdaq: NAII) generated FY19 net income of $6.5 million—or 92 cents per diluted share—on sales of $138.3 million, a 4% increase from the prior year ($132.4 million).

The beginning of 2020 was a challenging one for NAI. For the quarter that ended March 31, the company reported a net loss of $4 million, or a loss of 61 cents per diluted share, on sales of $25.5 million. Its sales decreased 28.1%, or $10 million, from $35.5 million in the comparable prior-year period. In a press release announcing the results, LeDoux cited “several unforeseen challenges” in the quarter, “including the loss of a former customer and the COVID-19 global pandemic.”

In part, NAI attributed waning sales to “certain customers discontinuing the use of our CarnoSyn beta-alanine in favor of generic beta-alanine and lower overall consumer demand for our customers’ CarnoSyn products.” In the nine months that ended March 31, CarnoSyn beta-alanine royalty, licensing and raw material sales revenue decreased $3.2 million, or 23.9%, from $13.5 million during the comparable period the prior year.

According to NAI’s website, its CarnoSyn brands—CarnoSyn instant release beta-alanine and SR CarnoSyn sustained release beta-alanine—are patented ingredients “well known to deliver benefits for athletic performance: increased strength, enhanced endurance, faster recovery and greater mental focus.”

Bell, NAI’s outside counsel, has been in numerous communications with FDA officials over what he described in a letter to FDA as “adulterated beta-alanine” being imported into the U.S., in violation of federal law. He pointed out NAI successfully navigated the NDIN process for CarnoSyn beta-alanine.

In a letter dated Feb. 1, 2019, FDA advised Bell it filed NAI’s notification for CarnoSyn beta-alanine at a total daily intake of 6.4 grams per day. The so-called good day or AKL (acknowledgement) letter is the best outcome for a manufacturer that submits a premarket dietary ingredient notification to FDA. The agency does not “approve” these notifications and reserves the right to take enforcement action against an acknowledged NDIN if the ingredient is found to be adulterated, unsafe or misbranded.

“NAI is the only company that has submitted an NDIN for beta-alanine to FDA,” Bell wrote in a Feb. 24, 2020 letter to Tave. “The company spent hundreds of thousands of dollars to not only compile publicly available information about the ingredient’s identity, manufacturing process and safety, but also to conduct its own commercially confidential, preclinical studies. The agency did not object to NAI’s basis for concluding that CarnoSyn beta-alanine is reasonably expected to be safe, as manufactured, and under the conditions of use proposed in the notification.”

NAI sources CarnoSyn beta-alanine from an ingredient manufacturer in Japan known as Yuki Gosei Kogyo Co. Ltd (YGK). The identity and safety data upon which NAI relied in its notification were based on YGK’s production method “and final product of commerce,” wrote Bell, a partner with Arnall Golden Gregory LLP (AGG), who leads his firm’s patent and dietary supplements practices.

Chinese suppliers of beta-alanine

YGK doesn’t control the production of beta-alanine imported into the U.S. In an attachment to the letter to Tave, Bell identified 24 Chinese manufacturers and exporters of beta-alanine between Feb. 1, 2019 and Jan. 31, 2020. Combined, the top three exporters alone shipped more than 1 million kilograms of beta-alanine, according to data in the attachment sourced from the PIERS TI import database—a subscription service maintained by IHS Markit. Of the more than 3.3 million kilograms of beta-alanine imported into the U.S. during the above time frame, NAI imported about 31% of the ingredient from Japan, while more than 2.3 million kilograms of the ingredient, or 69% of total beta-alanine imports, came from China, Bell advised Tave. (See chart below of Chinese suppliers in Bell’s attachment to Tave).

“None of the companies importing and selling generic beta-alanine made in China can rely on NAI’s NDIN #1103, nor have they made the statutorily required premarket notification,” Bell wrote to Tave. “Thus, there is no way to determine how, or if, the ingredients being imported into the U.S. and distributed as generic beta-alanine are quantitatively or qualitatively related to CarnoSyn beta-alanine—the only beta-alanine for which the required notification has been made. Because of this, FDA cannot assume that the basis for concluding that NAI’s CarnoSyn beta-alanine is reasonably expected to be safe can be directly applied or assumed for any of the generic forms of beta-alanine.”

Natural Products Insider reached out via email (in English and Mandarin) to eight of the Chinese exporters of beta-alanine, requesting they disclose their U.S. customers of beta-alanine, whether customers are using the ingredient in their dietary supplements, and their legal basis for concluding beta-alanine can be lawfully marketed in the United States. None of them returned multiple requests for comment.

Among those contacted were the second and third top-producing exporters, Anhui Huaheng Bioengineering Co. Ltd, which exported 306,000 kilograms of beta-alanine between Feb. 1, 2019 and Jan. 31, 2020 in 14 total shipments, and Jing Jing Pharmaceutical Co. Ltd., which exported 273,840 kilograms of the same ingredient during the above time period in 15 total shipments, according to the PIERS TI import database cited in Bell’s attachment.

A few months after NAI received its AKL letter, Jing Jing Pharmaceutical emailed LeDoux, touting the production of various products, including beta-alanine. “If you have any inquiry, please come here,” the April 11, 2019 email stated. “I will give you the competitive price.” In a more recent email sent June 18 to NAI, Jing Jing reminded the company that it produced beta-alanine and several other ingredients and wanted the “opportunity to show you our superior products.”

Other documents obtained by NAI show the consignees of beta-alanine shipments are often manufacturers of dietary supplements, or ingredient suppliers targeting the nutrition industry. For example, based on the search terms “beta-alanine” and “b alanine” for the time period Jan. 1, 2019 to June 10, 2019, Armada Nutrition was identified as the consignee of 13 different shipments at the U.S. port in Savannah, Georgia, according to data Bell retrieved from the PIERS TI import database. Armada Nutrition, which did not respond to multiple requests for comment, obtained all its beta-alanine from Anhui Huaheng Bioengineering. (While the database refers to “Anhui Huaheng Bioengineering,” the company describes itself on its website as Anhui Huaheng Biological Engineering or Anhui Huaheng Biotechnology).

During a four-month period ending June 26, 2020, Armada Nutrition obtained beta-alanine from Anqing Xinfu Chemical as well as Anhui Huaheng Bioengineering, according to additional import data obtained by Bell. Other consignees of beta-alanine from China included, among others, Nutravative Inc., an Allen, Texas-based ingredient supplier for the food, health and nutrition industries; and Fifth Nutrisupply Inc., a Chino, California-based supplier of nutritional raw materials. Neither company returned a request for comment in response to questions about beta-alanine.

Source: Natural Products Insider

CARLSBAD, Calif., May 14, 2020 /PRNewswire/ — Natural Alternatives International, Inc. (“NAI”) (Nasdaq: NAII), a leading formulator, manufacturer and marketer of customized nutritional supplements, today announced a net loss of $4.0 million, or $0.61 per diluted share, for the quarter ended March 31, 2020.

Net sales during the three months ended March 31, 2020 decreased $10.0 million, or 28.1%, from $35.5 million recorded in the comparable prior year period.  During the same period, private-label contract manufacturing sales decreased $9.1 million, or 28.7%, from the comparable quarter last year. Third quarter contract manufacturing sales decreased primarily due to lower sales to our largest contract manufacturing customer.

CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue decreased 23.3% to $2.8 million during the third quarter of fiscal 2020, as compared to $3.7 million for the third quarter of fiscal 2019.

We recorded a net loss of $4.0 million, or $0.61 per diluted share, for the three months ended March 31, 2020 as compared to net income of $2.0 million, or $0.27 per diluted share in the third quarter of fiscal 2019.  Our results for the third quarter of fiscal 2020 were negatively impacted by a non-cash $4.3 million accounts receivable and inventory reserve related to a former customer.

Net sales during the nine months ended March 31, 2020 decreased $24.3 million, or 22.4%, from $108.0 million recorded in the comparable prior year period.  For the nine months ended March 31, 2020, private-label contract manufacturing sales decreased $21.0 million, or 22.2%, from the comparable period last year. Sales to our largest customer declined $22.3 million or 38.3% for the nine months ended March 31, 2020. This sales decline was partially offset by increased sales to other new and existing customers.

CarnoSyn® beta-alanine royalty, licensing and raw material sales revenue during the nine months ended March 31, 2020 decreased $3.2 million, or 23.9%, from $13.5 million during the comparable period last year. We believe this decline was impacted by certain customers discontinuing the use of our CarnoSyn® beta-alanine in favor of generic beta-alanine and lower overall consumer demand for our customers’ CarnoSyn® products. These sales declines were further compounded by the challenges to point of sale transactions with many locations effectively closed due to ‘stay-at-home’ orders imposed by various governors starting in mid-March 2020.

Net loss for the nine months ended March 31, 2020 was $3.4 million, or $0.51 per diluted share, compared to net income of $6.7 million, or $0.95 per diluted share, for the nine months ended March 31, 2019.

On March 11, 2020, the World Health Organization classified the novel coronavirus, or COVID-19, as a pandemic.  The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has and will likely affect our business. To date, the Company’s facilities, located both in the United States and Europe continue to operate as an essential and critical manufacturer in accordance with federal, state, and local regulations.

As a measure to provide our business with added liquidity, and out of an abundance of caution, we withdrew $10.0 million from our credit facility with Wells Fargo Bank. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and shareholders. While we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we believe we will be able to remain operational and that our working capital will be sufficient for us to remain operational as the longer term consequences of this pandemic become known.

As of March 31, 2020, NAI had cash of $33.3 million and working capital of $51.2 million compared to $25.0 million and $57.1 million, respectively, as of June 30, 2019.  As of March 31, 2020, we did not have any remaining availability under our credit facilities.

Mark A. LeDoux, Chairman and Chief Executive Officer of NAI stated, “The third quarter brought several unforeseen challenges, including the loss of a former customer and the COVID-19 global pandemic.  While the loss of a former customer negatively impacted our results and the future remains unknown due to COVID-19, our balance sheet remains strong and we remain focused on growing our business.”

“Several components of the retail marketplace have been significantly impacted by the closure of gyms and challenges within other points of retail commerce for sports nutrition products.  This reality brought on by multiple stay-at-home orders and a surge in unemployment claims has had a negative impact on sales of sports nutrition products including CarnoSyn®, and it is unclear at this time when this will change. At the same time, several of our contract manufacturing customers are experiencing various levels of sales improvements related to their health and immune support product offerings.”

“We remain encouraged at emerging signs of demand improvement from our current and new customers as evidenced by our improving backlog of contract manufacturing orders.”

“I’m extremely proud of how our US and European management teams have navigated through this ongoing global crisis and we remain committed to offering the highest level of service and quality to our customers.”

NAI, headquartered in Carlsbad, California, is a leading formulator, manufacturer and marketer of nutritional supplements and provides strategic partnering services to its customers.  Our comprehensive partnership approach offers a wide range of innovative nutritional products and services to our clients including: scientific research, clinical studies, proprietary ingredients, customer-specific nutritional product formulation, product testing and evaluation, marketing management and support, packaging and delivery system design, regulatory review and international product registration assistance. For more information about NAI, please see our website at http://nai-online.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that are not historical facts and information.  These statements represent our intentions, expectations and beliefs concerning future events, including, among other things, the impact of COVID-19 and our ability to remain operational, our future revenue profits and financial condition, our ability to introduce products in new sales channels, maintain our patents, generate revenues from the commercialization of our patents and trademarks, secure compliance with our intellectual property rights, and develop, maintain or increase sales to new and existing customers, as well as future economic conditions and the impact of such conditions on our business. We wish to caution readers that these statements involve risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein.  NAI’s financial performance and the forward-looking statements contained herein are further qualified by other risks, including those set forth from time to time in the documents filed by us with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.

CONTACT – Michael Fortin, Chief Financial Officer, Natural Alternatives International, Inc., at 760-736-7700 or [email protected].

Web site: http://nai-online.com

by James Gormley

The Participants Are:

Annie Eng, CEO, HP Ingredients, Bradenton, FL, https://hpingredients.com

Mark LeDoux, Founder and CEO, Natural Alternatives International (NAI), Carlsbad, CA, www.nai-online.com

Vincent Tricarico, Vice President of Contract Manufacturing, NutraScience Labs, Farmingdale, NY, www.nutrasciencelabs.com

Eugene Ung, CEO, Best Formulations, City of Industry, CA, www.bestformulations.com

Years ago, companies would almost whisper when admitting that they were using contract or private-label manufacturers.

Today, for many finished-product brands it is making less and less sense to carry the massive overhead of manufacturing facilities and expensive equipment, and more and more sense to enlist the aid of a reputable contract manufacturer.

In today’s turbulent times—with supply-chain interruptions caused by global pandemics, such as COVID-19, and pressures caused by tariffs—it may make even more sense than ever before to rely on trusted manufacturing partners to help steer the production ship with a true hand.
Our select panel of industry experts sheds light on the ins and outs of contract manufacturing today, with some insights to boot.

NIE: What are the main advantages to using a contract manufacturer (CM)?

Ung: The main advantages for brand owners to use CMs typically revolve around not having to allocate financial and human resources to manufacturing so that the efforts can be focused on building the brand, sales and distribution.

Additionally, brands can leverage CMs for things like product innovation, supply-chain efficiencies, and getting into new dosage formats or products more easily. CMs also bring technical knowledge and experience to product development, and launching new products oftentimes will happen much faster when working with an experienced CM.

LeDoux: Companies with brand equity and consumer awareness should deploy their resources to merchandising and advertising and instead partner with experts who have a history of professional and ethical business practices in order to have their products manufactured according to local and federal regulatory standards.

To invest in the development of brick-and-mortar manufacturing is not only expensive, it is time consuming, and staffing such an organization with competent personnel is also very challenging in a time where unemployment is so low statistically.

Competency in research, development, pilot production, stability evaluation and product certifications should be, at the very minimum, key components of any successful and viable contract manufacturer.

Combining the intellectual capacity of both marketer and contract manufacturer can shorten the lead time to market and assure all parties of the excellence of the product offering without incurring exorbitant costs.

Tricarico: Aside from leveraging a CM’s expertise when it comes to product manufacturing/development and supply-chain management, the biggest advantage to using a CM from the standpoint of a brand owner is that it allows you to focus more time and energy on sales, marketing and other initiatives to help you get your brand off the ground.

Eng: The reasons why working with contract manufacturers is highly encouraged include superior knowledge of sourcing, formulating, processing, manufacturing and packaging. Also, with regulations, facilities must follow cGMPs (current good manufacturing practices), and this is a very expensive investment. The brand marketer, however, is responsible for due diligence in labeling, to conduct its own audit. It is the contract manufacturer’s responsibility to produce safe products for human consumption, adhering to the strictest quality standards.

NIE: What are the top one or two questions finished product brands should ask a potential contract manufacturer? And what should acceptable answers be?

Tricarico: One question would be: “Are you cGMP?” This will give you a sense of the company’s level of quality standards. If a contract manufacturer is not certified by a respected third party, they should automatically be crossed off the list. A follow-up question would be “What other certifications do you hold?”

Another question would be, “Can we visit your facility?” Seeing is believing, and getting to meet with the team that’s going to be responsible for taking your idea and turning it into a reality is very important. The same can be said as it relates to actually seeing the facility in which your product is going to be made.

Ung: Aside from the typical questions of minimum-order quantities and capabilities, brand owners should understand what differentiates that CM from others and should also conduct a facility audit.

CMs are typically good at certain things, so it’s important to understand their core strengths and areas of focus. Though they might be able to provide a wide range of products and services, it’s important to know if they outsource some of those things. A good CM will be very transparent with that type of information.

Along the lines of transparency, conducting a facility audit of the CM is critically important. A good CM will be organized, have in-house expertise to answer your questions, and you should come away with having a good sense of the type of business they are.

LeDoux: The first question should be to ask for evidence of financial stability. Ask for a balance sheet or a profit and loss statement. The second thing to ask for is evidence of inspections and reports of findings by federal and state authorities. The third thing should be a copy of the index for the Standard Operating Procedures and a copy of the product liability insurance policy. Eng: We believe that asking for references from satisfied repeat customers that have similar products is key in building trust. Make sure your contract manufacturer has the following: GMP certification, proof of passing FDA (U.S. Food and Drug Administration) inspections, liability insurance and SOPs (standard operating procedures).

But never start with price. There are cut-rate operations out there, but that will be reflected in your final product.

NIE: In terms of quality control, what role does the contract manufacturer play, and how does this relate to responsibility for ensuring quality up and down the supply chain?

Ung: The CM plays a critical role in quality control to ensure the product is manufactured to the product specifications. Our quality systems, size and scale allow us to support brands large and small in assuring the highest quality standards.

With that being said, it’s important for brand owners and CMs to have a good quality agreement which clearly indicates who is responsible for what so that there’s no misunderstanding where the responsibility lies.

Tricarico: The contract manufacturer sits at the center of the quality control puzzle. An experienced contract manufacturer is going to have a robust quality system in place that’s been audited for several years by outside agencies.

They are going to have supplier verification processes, raw material and component testing processes, storage and distribution processes, manufacturing and backpacking processes and documentation to back it all up.

If they say they do something and they don’t have documents to prove it, that should be an immediate red flag.

NIE: Country-of-origin labeling (or COOL) is mandated by U.S. Code for meat, fish and other agricultural commodities, but it is not required for any other products, such as dietary supplement ingredients. Should contract manufacturers voluntarily provide COOL info? Would finished product manufacturers be willing to use this info on bottle at retail, or does that solely depend on perception of value, such as “Madagascar vanilla”?

LeDoux: With the spread of the coronavirus, which initiated in a region in China, there is a greater sensitivity to country of origin. Frankly, I believe that materials should be disclosed to the brand in terms of their country of origin.

While it is true that many items are singularly produced in China today, including many active pharmaceutical ingredients, I think in the next several years there will be other companies in other countries, including the USA, that will commence production of basic raw materials for a variety of reasons.

Our policy is to fully disclose to our client partners the country of origin on all components that we utilize in our finished products. This is a matter of sound business policy and of transparency.

Tricarico: We feel that if a customer would like to know country of origin for the materials that are going into their product, they can certainly ask us for it and we will provide it. The use in marketing materials, or on the label we feel is really based on the availability of that material as well as the perceived value.

However, a brand owner should be careful to make country of origin claims on a label as it would limit supply and could impact lead times on production if a CM is limited to certain regions to source materials.

Ung: This really depends on the brand owner as to how they want to label their products. Generally speaking, product labels should be accurate and not misleading. There is dual responsibility between the brand owner and CM regarding labeling.

Typically, a good CM will support the brand with the information they need. For example, if a brand wants to list the country of origin for the various ingredients, the CM should be able to provide that information to the brand owner.

When it comes to product provenance or origin, our unique focus on consumer research inform the extent to which these characteristics signal value to the consumer. This helps make better labeling recommendations for customers that are seeking the added insight.

NIE: What does “traceability” mean to you? What should it mean for both brands and their products on shelf?

Tricarico: Traceability means superior lot tracking and overall documentation practices with organized record keeping of that documentation. The master manufacturing record, as well as the Batch Production record for every lot of product produced, should document every step in the process of creating the desired finished good.

A brand owner should choose a manufacturer that is able to provide documentation on every step of the process, from sourcing to shipping and everything in between. This is why on-site audits and visits are so critical. At the brand level, there should also be SOPs in place for site audits, as well as recall procedures etc.

LeDoux: In the event there is a problem with a product found post-market release, it is critical to a risk-based health system to have full traceability by lot number, batch records and raw materials procurement records in order to identify root causes of defects in the finished products, and to be able to effectively and efficiently initiate voluntary recalls or withdrawals from the marketplace in the abundance of caution principle.

Lot numbers of finished products that do not tie back to individual batch records, packaging records and raw material procurement and testing records are of little or no value. The requirement to retain samples of all raw materials received is also mission critical to be able to test said samples to identify the potential problem, should one exist.

Ung: Traceability from a product-safety perspective refers to the ability to trace a particular lot of a raw material to the lots of finished products and vice versa. A good CM will have proper controls and documentation in place related to product recall procedure, which will require this type of traceability.

Traceability can also refer to the source of the ingredients used in the products (i.e. the material comes from a certain geographic region, part of a plant/animal, etc.). CMs can typically get this information from raw material vendors, if that information is available.

NIE: Regarding the trend for “clean labels” and “simple ingredients,” how has this trend impacted dietary supplement products in the U.S.?

LeDoux: Various forms of market differentiation have been on display in our industry for the past five decades. When I originally started in this industry in 1975, it was not uncommon to see sugar coated vitamin and mineral tablets, colored with white titanium dioxide. Products made with starch as disintegrants, or lactose (milk sugar) as binding excipients, in the tableting process were common, as was the use of metallic stearates for lubrication.

Today, there is a desire to avoid sugars, starches or their derivatives and any metallic stearates, largely targeted to people with concerns regarding potential allergic reactions to these compounds. This is further evidenced with gluten-free preparations and other novel uses of extracts from rice and other natural products which have replaced many of the earlier forms of processing aids.

Ung: There’s no doubt that clean-label, simple ingredients are the consumer trends. We believe that this trend is positive for the industry as clean and simple imparts a feeling of safety and trust, which helps to grow the category.

From a technical, formulation and manufacturing perspective, clean label and simple ingredients can present some challenges. However, this trend isn’t going away, so raw material suppliers and CMs have been working on product innovation to address these trends.

NIE: In the interests of transparency, what specific data and documentation should finished-product brands and CMs share with each other?

Tricarico: There should be a quality agreement as well as a supply agreement put in place that clearly outlines the commitments and expectations the brand owner and manufacturer are making to each other. But, at minimum, the brand owner should supply complete product specifications, including desired finished product testing.

The CM should supply, at minimum, a formula sheet, a supplement fact panel and a fully inclusive finished product COA. The contract manufacturer should also welcome site visits and audits on an annualized basis. There shouldn’t be any surprise when it comes to how a CM is going to make the product to the specifications provided.

NIE: Should finished product companies ask potential CMs about how they deal with testing problems, raw material supply issues, FDA inspections and auditor inspections? If so, please expand.

LeDoux: Our company has a philosophy that there are no secrets when it comes to the safety of consumers and products they consume. Therefore, under contract and appropriate confidentiality and quality agreements we share everything with our client partners. Surprises should be positive, not negative experiences!

Ung: Brands and CMs should work together to develop a good finished product specification so both are on the same page. The data and documentation will flow from the product specification. For example, if the product is to be claimed as “organic,” then that needs to be clearly identified on the finished product specification and there will be a series of documents required to support that.

Generally speaking, CMs should be transparent with any ingredient information. Beyond technical product information, exchanging consumer and category insights can create great synergies between the two. Our access to market research creates unique value for our brand partners, fueling innovative consumer solutions.

Tricarico: Yes! The CM should be able to explain the process from start to finish. That includes understanding what the raw material supplier verification process looks like, how materials and components are tested once they are received, how they are stored, how they are released into production, what testing goes on during and after production and packaging processes are complete. And they should be able to let you know how they handle deviations or unexpected hiccups.

NIE: Regarding certifications, there are a variety of seals, standards and certifications being used. What should finished-product manufacturers ask to make sure that the accreditations or seals being used are meaningful?

LeDoux: A group of industry leaders is working on this under the Supplement Safety Compliance Initiative (SSCI), which is a retailer-driven initiative seeking to establish benchmarks for inspections of manufacturing facilities and processes.

Too often in the past, companies have run afoul of FDA warning letters shortly after having been given a passing bill of health by an independent GMP-certifying body that is a private corporation. At SSCI we are actively working on finalizing our benchmarking protocols and asking all certifying bodies to submit their programs for evaluation. After that is completed, the Board of Directors of SSCI will be opening a dialogue with FDA regarding interfacing with the agency to help reduce obvious concerns by the agency findings, and to reduce “audit tourism” of multiple facilities. This will strengthen the value of these third-party certifications and open up the opportunity to extend the process further downstream (or upstream) to the raw material providers.

NIE: Related to contract manufacturing (or using CMs), what would you like the industry to know about your proprietary technologies, your services, your sourcing, your systems or something else?

LeDoux: In essence, NAI’s reputation speaks for itself. We have been in business for 40 years, and we are the only publicly traded corporation which provides all of its financial and operating information quarterly under review by audit and the oversight of the SEC. With products produced in our state-of-the-art facilities in California or in Switzerland, we service the needs of customers serving over 40 countries worldwide.

We are the only company to have certification by the Australian Therapeutic Goods Administration for 19 consecutive years, and we have Swissmedic certifications of our Swiss facilities. Likewise, we are an organic processor in the USA, and have been involved in leading the charge for better transparency in regulations and testing for four decades.

Our CarnoSyn IP has been one of the most successful products of its generation in both sports nutrition and in the growing category of healthy aging.

Ung: Best Formulations has been providing contract manufacturing services for over 30 years. We specialize in soft gel manufacturing, two-piece hardshell capsules, tablets, powders, teas and also have full turn-key packaging capabilities. We have distanced ourselves from other CMs through innovation, quality and consumer insights.

Best Formulations has one of the strongest R&D innovation, product formulation and technical teams in the industry. We’re internationally recognized as the leader in vegetarian soft gel innovation and our ability to encapsulate difficult “paste” formulas. The vast majority of the products we manufacture are complicated, unique differentiated formulas.

We provide peace of mind for our customers. And Best Formulations has robust in-house laboratory testing capabilities. A full 10 percent of our staff is in the quality operations department. In fact, quality has been the cornerstone of the company’s values and a point of differentiation.

Consumer insights are how we stay on the forefront of new product development, innovation, and trends and how to connect brands with consumers. Unlike most other CMs, we do our own consumer research to understand the new trends consumers are interested in. If we can better directly understand what the end consumer wants, then we can better offer solutions to meet those needs. NIE

Source: Nutrition Industry Executive

Nutritional Outlook: Do you expect to see an increase in the number of companies making immune-health claims for their ingredients or finished products during the COVID-19 pandemic?

Mark LeDoux, chairman and CEO, Natural Alternatives International (NAI; Carlsbad, CA): There is no shortage of companies or advertisers who are seeking to capitalize on consumers’ concerns raised by this pandemic, but that does not give them license to make unsubstantiated claims regarding products. There are multiple substances that can be shared with consumers deploying recognized nutrients that possess well-validated structure and function claims, and companies should be mindful of their legal responsibilities in communicating with consumers.

John Quilter, vice president and general manager, Kerry (Beloit, WI): Unsurprisingly, there’s much more focus on immune health now. It’s not necessarily that companies are making new claims, but many are taking the opportunity to promote immune-health products in their portfolios or emphasizing immune-health benefits over other selling points.

Chris Tower, vice president of sales and business development, Artemis International (Fort Wayne, IN): Yes, absolutely. The COVID-19 pandemic has catalyzed consumers’ fears and, subsequently, the immune-boosting health category has become the latest trend in the dietary supplement arena, acutely on an unprecedented historic level. Clearly this has proven out with the latest SPINS data upon the onset of the pandemic.

My concern in times like this is overhyping ingredients—over-promotion among companies that is far beyond scientifically substantiated efficacy, which provokes unrealistic expectations among consumers. This fuels an increased demand and increased numbers of new consumers into the supplement category for the first time. I’ve witnessed over the past two decades that industry-related acute demand like this can often result in a relative long-term proportional correction in the demand curve, and usage of these related products will settle back to normalized demand.

Nutritional Outlook: How concerned are you about companies making irresponsible or illegal claims that supplement products or ingredients can prevent, treat, or cure COVID-19?

LeDoux: There have been multiple warning letters issued by FDA to companies promoting their products as intended to treat, cure, prevent, or mitigate disease—in this case COVID-19. But we are always concerned with bad actors in the industry. With the reduction in FDA inspections, we fear this gives license to unscrupulous entities trying to commercialize products without adequate GMP safeguards in their sourcing, production, and labeling. Has there been enough action on the enforcement end (e.g., FDA warning letters) to root out bad actors? The Office of Dietary Supplements has been aggressively seeking to warn companies and individuals in this space, but until products are seized and financial assets frozen through court order, I fear there will be continued mischief.

Quilter: It’s a major concern. It’s always important to avoid exaggerated claims, but even more so at times of heightened public worry. There’s a huge difference between pointing out that a well-supported immune system is the best defense against health challenges and suggesting that a product can prevent COVID-19.

We’ve been very careful about the way we’ve talked about our immune-health ingredient Wellmune during this crisis. It’s backed by more than a dozen clinical studies, which demonstrate its ability to help strengthen the immune systems of people of all ages. However, there’s currently no research demonstrating its effectiveness against coronavirus specifically, and we’ve been very upfront about that.

Tower: I am extremely concerned. Fortunately, FDA and FTC are quickly acting with warning letters, and I have a high degree of confidence this is being backed up with enforcement. In perspective, the past two years we’ve witnessed a myriad of multiple disease state illegal claims among cannabis supplement companies/products, and though it may be easy to dismiss this as a result of new players entering the supplement industry and riding the cusp of the CBD wave, it’s encouraging to see FDA enforcing illegal disease state claims in violation of DSHEA structure-function claim limitations. There is zero tolerance for this. What is surprising is seeing established industry veterans stretching the limits—we’ve seen bridging into direct disease (anti-viral) claims and even directly marketing their products as a treatment or prevention of COVID-19.

Nutritional Outlook: What kinds of immune-health ingredients should product marketers and formulators be relying on and trust during this time?

Melanie Bush, director of science, Artemis International: Product formulators should take great care in selecting top-notch quality ingredients with proven efficacy to ensure they are providing the best products that will truly help their customers. Now is not the time for pop-up ingredients that are believed to have some immune-supporting potential or other versions that lack proper vetting. Tried-and-true ingredients with a strong history of use, clean and clear supply chains, and proper scientific validation of efficacy have always been, and continue to be, the best choices for formulators.

For example, European black elderberry (Sambucus nigra) has been used for centuries to ward off ailments. Quality ingredients have been validated with clinical studies and maintain a controlled supply chain from the growers on up. A boom in elderberry sales due to a mainstream awareness of its potent immune-supporting properties has caused a number of new elderberry varieties and offerings to pop up in the market, often at a lower cost. Buyers and formulators should watch for potential adulteration and not to assume all elderberry is created equal.

Kim Edwards, global product manager, Kemin Human Nutrition & Health (Des Moines, IA): Marketers and formulators should look at ingredients that are clinically demonstrated to safely enhance the immune system. Several surveys have identified overall health and well-being, digestion, and immune health as top reasons consumers take supplements—consumers are looking to stay healthy year-round. Solutions that fit into a wholesome lifestyle approach, along with good nutrition, are desirable to support their health.

LeDoux: Responsible companies should rely on well-documented research that has undergone gold-standard tests, (e.g., double-blind, placebo-controlled investigations). Vitamins C and D, and minerals such as zinc, have well-documented findings that suggest they benefit the human immune system.

Aparna Parikh, head of global marketing communications, Lonza (Basel, Switzerland): We believe brand trust is built on robust evidence and consistent high quality and compliance. A consumer-driven product design approach is increasingly important since it takes into account consumers’ needs and preferences—from their health goals to what they look for on a product label before making a purchase. Results from a 2018 report conducted by the Natural Marketing Institute and Lonza show clinical proof of efficacy is very important to 52% of U.S. supplement users in their quest for greater safety and confidence when purchasing supplement products. Aligning with consumer needs through science-backed, high-quality ingredients should always be the aim for product marketers and formulators.

We’ve further noted that 80% of U.S. supplement users think it’s important to know the source of ingredients when making a purchasing decision. As such, it’s increasingly important for brands to explore immune-health ingredient options that not only offer a science-based mechanism of action, but are also plant-based, clean-label, or naturally derived.

Quilter: The ingredients you can rely on and trust are the ones backed by gold-standard science. The best strategy is always a commitment to safety and efficacy backed by high-quality research. Consumers now face a cacophony of claims, which can make them confused, cynical, or both. Scientific backing from peer-reviewed studies helps them understand the real benefits of immune health products, ultimately simplifying their purchase decisions.

Nutritional Outlook: Is there a sufficient number of ingredients on the market with strong scientific research showing they benefit immune health in healthy humans?

Bush: There is definitely a spread across the market between clinically validated, high-quality ingredients and often less expensive offerings that might be lacking in terms of true validation, levels of actives, or analytical quality testing. Often, branded ingredients have gone through the steps to have substantial backing in the form of research and clinical trials to differentiate them from more general offerings in the market. It is difficult to say what number is sufficient in terms of substantiated ingredients in the marketplace, as they ideally all should be.

LeDoux: Indeed, there are. As indicated earlier, the use of certain vitamins and minerals in addition to herbal compounds such as elderberry have been studied for many years for their capacity to reduce the severity of symptoms associated with colds¹ and influenza. Of note is the fact in 1997 we knew elderly subjects who supplemented with zinc (20 mg/day) and selenium (100 mcg/day) for two months had significantly less infectious events over a two-year period². These results indicate that supplementation with low doses of vitamins and trace elements is able to rapidly correct corresponding deficiencies in the institutionalized elderly.

Quilter: If you look how important scientific substantiation is to consumers, it would be fair to say there aren’t enough immune-health products backed by robust research. We recently surveyed over 11,000 consumers in 14 different countries (Kerry Global Consumer Survey – Digestive & Immune Health, 2019). Nearly four in 10 (39%) said seeing claims based on research or scientific data would make them more likely to buy a healthy lifestyle product. This figure rose to above half in some regions, with 51% of consumers in Brazil and Thailand considering research data a top purchase driver.

Nutritional Outlook: Aside from your company’s ingredients, what are the most promising dietary supplement ingredients for immune health?

LeDoux: An abundance of evidence has accumulated over the past 50 years demonstrating the antiviral activity of zinc via numerous mechanisms³. Beta-glucans are also an area worthy of significant consideration, given their well-studied positive effects on the human immune system and their capacity to increase immunoglobulins essential for robust immune function⁴. Acetyl-L-cysteine (NAC) is also promising in this fight. This molecule inhibits virus replication and expression of pro-inflammatory molecules, which leads to inflammation, tissue damage, and respiratory demise⁵.

Nutritional Outlook: Which of your ingredients support immune health, and what scientific evidence do you have to substantiate their efficacy?

Bush: While there are several dark berries such as aronia and black currant with preliminary research indicating anti-viral and/or immune-promoting activity, the shining star within the berry category in terms of immune support properties is the European black elderberry.  Artemis’s ElderCraft line of European black elderberry standardized extracts are made using the premium Haschberg variety of Sambucus nigra black elderberries and have been scientifically validated in numerous studies, including human clinicals. In a 2016 human study, ElderCraft was shown to significantly reduce the duration and severity of cold/flu symptoms in long-haul flight passengers¹. The gentle extraction process used to make ElderCraft extracts without any harsh chemical solvents retains key natural compounds that support its anti-viral and immune-supporting qualities.

Edwards: Kemin offers BetaVia Complete, a nutrient-rich, dried whole-algae (Euglena gracilis) fermentate containing beta-1,3 glucan (>50%), protein, fatty acids, vitamins, minerals, and carotenoids. Clinical and preclinical research supports marketing claims for immunity, the digestive tract, and respiratory tract health.

In vitro research demonstrates innate immune cells (macrophages, dendritic cells) bind [with] or phagocytize BetaVia Complete, triggering a release of chemical messengers called cytokines that play a critical role in balancing and coordinating healthy immune responses. In a randomized, double-blind, placebo-controlled 90-day study of healthy, active adults, participants taking BetaVia Complete reported 3.3 fewer sick days, 70% fewer upper respiratory tract infection (URTI) symptoms, 10 fewer URTI symptom days, and significantly lower overall severity of URTI symptoms⁶.

LeDoux: The role of carnosine, a dipeptide consisting of beta-alanine and L-histidine, has promise. In a study published in the Journal of General Virology⁷, it markedly ameliorated H9N2 swine influenza virus-induced lung injury. The problem with administering supplemental carnosine is that it addresses the situation uneconomically—there is ample L-histidine available in the human body but a paucity of beta-alanine. By ingesting supplemental beta-alanine, the body can then manufacture the dipeptide of carnosine internally, addressing needs brought on by oxidation of healthy tissues in the lungs due to viral load and resulting immunological response. We offer a sustained-release form of beta-alanine, SR CarnoSyn, that ensures carnosine generates naturally in the body for an efficacious dosage to improve health.

Parikh: Lonza’s proprietary ResistAid arabinogalactan is a naturally derived, sustainably produced ingredient, extracted from North American Larch trees using a gentle, water-based method. It has been clinically demonstrated to potentially support natural immune function by different mechanisms of actions: indirect action through modulation of the gut microbiota and directly through support of the innate and adaptive immune system. These mechanisms have been demonstrated to support increased beneficial immune cell populations and also to help modulate and deliver an appropriate immune response. Based on two randomized, double-blind, placebo-controlled human trials, ResistAid has been shown to further support the immune system when added to vaccines^8,9. In addition, healthy subjects consuming 4.5 g of ResistAid experienced fewer symptoms of respiratory tract infections compared to placebo¹⁰.

Quilter: Wellmune is our proprietary baker’s yeast beta-1,3/1,6 glucan; it is clinically proven to help support the immune system and is backed by over a dozen clinical studies. Most recently, a scientific review of the role of beta glucans in immune health highlighted their benefits for healthy populations that have increased risk of respiratory infections¹¹. The review focused on their mechanism of action as immunomodulators, exploring the theory that they train the body’s immune cells, triggering changes that help fight off pathogens. It also highlighted several studies providing evidence of Wellmune’s ability to support overall immune health in a range of healthy populations:

• Children supplementing with Wellmune were significantly healthier during the cold and flu season. Wellmune was reported to decrease the incidence and duration of common colds by 66% compared to a placebo group.¹²
• Children consuming follow-up formula fortified with Wellmune experienced a significant decrease in the incidence and duration of acute respiratory infection compared with those who were given an unfortified milk beverage.¹³
• Wellmune significantly reduced the drop in T cells and monocytes commonly seen after an intense exercise session.¹⁴
• There was a significant decrease in post-marathon upper respiratory tract infection symptomatic days among runners who supplemented with Wellmune.¹⁵
• Supplementation with Wellmune can reduce ragweed allergy symptoms and alleviate symptom severity.¹⁶

We also offer GanedenBC30, a spore-forming probiotic with benefits for immune health as well as digestive health. A study on seniors found daily consumption can increase beneficial groups of bacteria in the human gut and potentially increase production of anti-inflammatory cytokines.¹⁷

Nutritional Outlook: What are your hopes and concerns for the immune-health supplements category during this pandemic?

LeDoux: My hope is that people retain hope and good common sense. While the recommendations from the CDC should be followed, good nutrition, including supplementation when warranted, good hydration, and practicing proper hygiene are also essential. The industry also needs to do its part in self-policing and testing as well as verifying purity, potency, and stability of the products that are being produced. This pandemic has given the industry the opportunity to work directly with healthcare professionals to help provide products as part of a comprehensive approach to healthcare. Doctors now recognize the value of various supplements in the treatment and care of their patients—it is our responsibility to make sure they have access to the finest products possible in a timely manner.

Parikh: We expect for the immune-health category to remain a high priority for consumers over the months and years to come. This is, in part, due to the current global situation but more broadly driven by growing awareness around immunity and how to support it. For manufacturers, it’s essential to continue to invest in innovation, propelled by a consumer-driven and robust scientific approach—this can enable a more diverse range of immune-health solutions designed to support specific consumer needs and values.

For supplement manufacturers, the challenge right now, and always, is to present options that are backed by robust science to help consumers choose the best option for them.

Quilter: Demand for products with immune-health benefits is going to increase, and we hope leaders in the category will demonstrate moral responsibility. At this time of uncertainty, it’s more important than ever that our industry behaves responsibly and demonstrates a commitment to safety, efficacy, and scientific research.

Tower: My concern over adulteration of Sambucus nigra is amplified 400%, which is a direct reflection of the increase in sales at retail in the United States since the onset of COVID-19 in March. Last year, we witnessed increasing indications of adulteration—we tied this to elderberry’s steady rise in popularity the past few years based on clinical studies. Now, with the unprecedented COVID-19 fervor and subsequent 400% increase in demand for elderberry, there now exists a shortage of supply to satisfy this demand. Coupled by FDA temporarily suspending GMP inspections, we are encountering the perfect storm of adulteration of European black elderberry. We are seeing this problem increasing on the bulk ingredient supply-side and now migrating into consumer products at retail.

Raising awareness of the problem, continuously, is important, and applying proper fit-for-purpose analytical tools as means to identify and protect against this level of adulteration is critical.

References:
1. Tiralongo E et al. “Elderberry Supplementation Reduces Cold Duration and Symptoms in Air-Travellers: A Randomized, Double-Blind Placebo-Controlled Clinical Trial.” Nutrients, vol. 8, no. 4 (2016): 182

2. Girodon F et al. “Effect of micronutrient supplementation on infection in institutionalized elderly subjects: a controlled trial.” Annals of Nutrition & Metabolism, vol. 41, no. 2 (1997): 98-107

3. Read SA et al. “The role of zinc in antiviral immunity.” Advanced Nutrition, vol. 10, no. 4 (2019): 696-710

4. Imran Bashir KM et al. “Clinical and Physiological Perspectives of β-Glucans: The Past, Present, and Future.” International Journal of Molecular Sciences, vol. 18 (2017): 1906

5. Geiler J et al. “N-acetyl-L-cysteine (NAC) inhibits virus replication and expression of pro-inflammatory molecules in A549 cells infected with highly pathogenic H5N1 influenza A virus.” Biochemical Pharmacology, vol. 79, no. 3 (2010): 413-420

6. Evans M et al. “Effect of a Euglena gracilis Fermentate on Immune Function in Healthy, Active Adults: A Randomized, Double-Blind, Placebo-Controlled Trial” Nutrients, vol. 11, no. 12 (2019): 2926

7. Xu T et al. “Carnosine markedly ameliorates H9N2 swine influenza virus-induced acute lung injury.” Journal of General Virology, vol. 96, no. 10 (2015): 2939-2950

8. Udani JK et al. “Immunomodulatory Effects of ResistAid™: A Randomized, Double-Blind, Placebo-Controlled, Multidose Study.” Journal of the American College of Nutrition, vol. 32, no. 5 (2013):331-338

9. Udani JK et al. “Proprietary arabinogalactan extract increases antibody response to the pneumonia vaccine: a randomized, double-blind, placebo-controlled, pilot study in healthy volunteers.” Nutrition Journal, vol. 9 (2010)

10. Riede L et al. “Larch arabinogalactan effects on reducing incidence of upper respiratory infections.” Current Medical Research and Opinion, vol. 29, no. 3 (2013)

11. Castro ED et al. “Beta‐1,3/1,6‐glucans and Immunity: State of the Art and Future Directions.” Molecular Nutrition and Food Research, Published ahead of print on March 29, 2020

12. Meng F “Baker’s Yeast Beta-Glucan Decreases Episodes of Common Childhood Illness in 1 to 4 Year Old Children during Cold Season in China.” Journal of Nutrition & Food Sciences, vol. 6, no. 4 (2016)

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Source: Nutritional Outlook

Dear Valued Customers:

As you are aware the Governor of California issued an Executive Order on March 19, 2020, related to the novel Coronavirus/ Covid-19 and for the protection of the public health of all Californians. This Executive Order specifically required the supply chain for certain necessities such as food, prescriptions and health care to remain accessible and further identified 16 critical infrastructure sectors that needed to continue their work because of the importance of these sectors to Californians’ health and well-being.

Accordingly, Natural Alternatives International’s operations will remain open for business as an essential and critical food manufacturer, distributor and seller of ingredients and products that are important for the protection of the public health.

Below are excerpts from the California Executive Order N-33-20 and other authoritative references regarding this topic.

California Executive Order N-33-20:
The Governor’s March 19, 2020, Executive Order requires “all individuals living in the State of California to stay home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors, as outlined at https://www.cisa.gov/identifying-critical infrastructure-during-covid-19.” There are 16 critical infrastructure sectors whose “assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof.” The manufacture and sale of dietary supplements fall within three of these critical infrastructure sectors – food and agriculture, healthcare & public health and critical manufacturing.

Food and Agriculture
According to the Department of Homeland Security, the following companies, facilities and workers perform critical infrastructure work related to food and agriculture:

• Workers supporting groceries, pharmacies and other retail that sells food and beverage products.
• Food manufacturer employees and their supplier employees.
• Employees and firms supporting food, feed, and beverage distribution, including warehouse workers, vendor-managed inventory controllers and block chain managers.
• Workers supporting the sanitation of all food manufacturing processes and operations from wholesale to retail
• Workers necessary for the manufacturing of materials and products needed for … food and agriculture.
  See Memorandum on Identification of Essential Critical Infrastructure Workers During Covid-19 Response (Mar. 19, 2020).

The Food and Agriculture Sector-Specific Plan (“FA Plan”) falls under USDA and FDA guidelines and procedures, The 2010 FA Plan expressly applies the definition of “food” set forth in 201(f) of the Federal Food, Drug and Cosmetic Act (“FDCA”) as “articles used for food or drink for man or other animals, (2) chewing gum, and (3) articles used for components of any such article.” https://www.dm.usda.gov/ohsec/docs/nipp-ssp-food-ag-2010.pdf. The first example listed for food is “Dietary supplements and dietary ingredients.”

Section A.2.2. of the 2015 FA Plan states that FDA performs its public health duties pursuant to some of the following statutory authorities: Federal Import Milk Act (1927); Federal Food, Drug, and Cosmetic Act of 1938 (FDCA), as amended; Public Health Service Act (1944); Fair Packaging and Labeling Act (1966); Infant Formula Act of 1980, as amended; Nutrition Labeling and Education Act of 1990; Dietary Supplement Health and Education Act of 1994; Public Health Security and BioterrorismPreparedness and Response Act of 2002 (the Bioterrorism Act); FDA, FSMA (2011), and other related statutes.¹ https://www.cisa.gov/sites/default/files/publications/nipp-ssp-food-ag-2015-508.pdf.

Also, the Federal Emergency Management Agency (“FEMA”) is now involved in the COVID-19 response. In 2019, it clearly stated that Health & Human Services (“HHS”)/FDA is responsible for protecting public health by ensuring the safety, efficacy, and defense of our nation’s food (human and pet), animal feed supply, and dietary supplements. HHS/CDC in coordination with the States, develops and implements surveillance systems to monitor the health of the human population.

https://www.fema.gov/media-library data/1563815397989-09b126c09674ce4077dc1efed583391 /ESF15_2019_Final_07.19.19.pdf

Thus, companies, facilities and employees working in the field of dietary supplement and dietary ingredients, both considered “food” under the FDCA, are allowed to continue to work under the food and agriculture critical infrastructure sector exemption to the Executive Order.

Critical Manufacturing
The manufacture and sale of dietary supplements containing vitamins, minerals, herbs or other botanicals, amino acids, substances to increase total dietary intake, or a concentrate, metabolite,

1 This list is not exhaustive, but illustrates the broad authority of FDA. constituent, extract, or combination of these would support public health. As such, the activity falls within the critical manufacturing critical infrastructure sector exception to the Executive Order.

Healthcare & Public Health
Federal law provides that the use of dietary supplements is an important part of the health of American consumers. Section 2 of the Dietary Supplement Health and Education Act makes express Congressional findings that supplements promote health, prevent disease, and reduce health care expenditures. Americans regularly consume dietary supplements of vitamins, minerals, or herbs as a means of improving their nutrition. The statute also found that “the nutritional supplement industry is an integral part of the economy of the United States….” Pub. L. 103-417 § 2. Thus, companies, facilities and employees working in the field of dietary supplement and dietary ingredients are allowed to continue to work since that activity is within the healthcare & and public health critical infrastructure sector to the Executive Order.

CARLSBAD, Calif., March 18, 2020 /PRNewswire/ — Natural Alternatives International, Inc. (“NAI”) (Nasdaq: NAII), a leading formulator, manufacturer and marketer of customized nutritional supplements, today announced its Board of Directors authorized a $1.0 million increase to its stock repurchase plan bringing the total plan authorized repurchase amount to $10.0 million. Under the repurchase plan, NAI may, from time to time, purchase shares of its common stock, depending upon market conditions, in open market or privately negotiated transactions. Since December 31, 2019, we have purchased an additional 198,336 shares of our common stock under this plan bringing our total plan purchases to date to 1.2 million shares. At present there is $2.0 million remaining available for stock repurchases under the plan.

Mark A. Le Doux, Chairman and Chief Executive Officer of NAI stated, “While we face an unprecedented situation with the global impact of the Covid-19 coronavirus, including an unknown financial impact to our company, we remain committed to buying back shares anytime we believe it is in our stockholders long term best interest, while continuing to be cautious about the unknown impact of the current health crisis.”

NAI, headquartered in Carlsbad, California, is a leading formulator, manufacturer and marketer of nutritional supplements and provides strategic partnering services to its customers. Our comprehensive partnership approach offers a wide range of innovative nutritional products and services to our clients including: scientific research, clinical studies, proprietary ingredients, customer-specific nutritional product formulation, product testing and evaluation, marketing management and support, packaging and delivery system design, regulatory review and international product registration assistance. For more information about NAI, please see our website at http://nai-online.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that are not historical facts and information. These statements represent our intentions, expectations and beliefs concerning future events, including, among other things, our financial condition, and our ability to acquire our own shares on a reasonable basis, as well as future economic conditions and the impact of Covid-19 and such other conditions on our business. We wish to caution readers these statements involve risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or views expressed herein. NAI’s financial performance and the forward-looking statements contained herein are further qualified by other risks including those set forth from time to time in the documents filed by us with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K.

CONTACT – Michael Fortin, Chief Financial Officer, Natural Alternatives International, Inc., at 760-736-7700 or [email protected].