Exclusive: Nu Skin told not to use researcher’s name

By Anna Yukhananov and Phil Wahba

WASHINGTON | Thu Aug 16, 2012 4:43pm EDT

WASHINGTON (Reuters) – Stanford University has sent a “cease and desist” letter to Nu Skin Enterprises Inc asking the company to stop using a university researcher’s name in its advertising material, according to an email obtained by Reuters.

The letter says Stuart Kim, a Stanford researcher, is listed as a “Nu Skin Partner” even though he has nothing to do with the company. It asks Nu Skin, a personal-care products maker, to remove all references to him from its website by Friday. Kim previously collaborated with Nu Skin but stopped the relationship in 2011, Kim told Reuters on Thursday.

The news comes hours after short seller Andrew Left’s Citron Research issued a report critical of Nu Skin, saying that Nu Skin had misrepresented its relationship with Kim and had never funded any of his research.

A Stanford spokesman said the university’s dermatology department has a long-standing clinical trial relationship with Nu Skin, and a clinical trial is currently under way. Kim works in the genetics department.

Nu Skin said its relationship with Stanford began in 1999. In 2009, it gave $1.5 million to a study on human skin aging with Kim, who specializes in genetics, and other scientists. Kim later left the study, but two dermatologists, Dr. Anne Change and Dr. Alfred Lane, continue to work on the study, Nu Skin said.

Shares of the company ended down 4 percent at $40.82 on Thursday on the New York Stock Exchange.

Citron published a separate report last week, stating that Nu Skin’s sales model on mainland China, the fastest growing market in direct-selling, amounted to an illegal multi-level marketing scheme. The report sent the company’s shares down nearly 10 percent.

Nu Skin Chief Financial Officer Ritch Wood said on Wednesday that Nu Skin’s sales model complied with Chinese regulations.

On Thursday, Citron also accused Nu Skin of exaggerating the scientific claims of its anti-aging products, which could expose them to scrutiny by the U.S. Food and Drug Administration and lead to product recalls.

In a regulatory filing last week, Nu Skin said the FDA had recently detained shipments of the company’s Galvanic Spa facial units because the agency thought the product could require clearance as a medical device.

Citron said claims made about Nu Skin’s ageLOC products could potentially lead to their recall in the United States if the FDA decides they could be considered a drug.

The FDA treats all products that make medical claims as drugs, and a company would have to conduct trials to prove the claims before they could sell their products. Cosmetic products do not require clinical trials or FDA approval before they are sold.

Wood, Nu Skin’s CFO, on Thursday morning told analysts at an investor conference in Boston that the company expects sales of the ageLOC family of products to reach $800 million, or roughly 40 percent of what Wall Street analysts think the company will take in this year, according to a webcast of the meeting.

(Additional reporting by Daniel Bases in New York; Editing by Gerald E. McCormick and Steve Orlofsky)

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