Could GNC (GNC) Shares Flop 7%+ on DMAA Issue?
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GNC Holdings (NYSE: GNC) shares are trading slightly lower Friday amid market weakness and as well as a report in the WSJ advising investors to be cautious of its potentially inflated price.
According to the report, the recent FDA call on stimulant dimethylamylamine, or DMAA, may hurt GNC's top- and bottom-line results. Though GNC didn't disclose DMAA sales, the product has seen tremendous growth across multiple outlets.
The ordeal started out when DMAA was first used as a decongestant in 1944, then a study in 1996 found different attributes for the geranium. Last December, the U.S. Defense Department pulled DMAA off of military base stores following two soldiers having heart attacks. Recently, in New Zealand, the peer-reviewed Annals of Emergency Medicine said there have been three documented cases of cerebral hemorrhage stemming from DMAA use.
The FDA said companies slinging DMAA have until May 18th to address its recently-issued warning letters on DMAA. But, how much might GNC miss out on?
According to the WSJ, one spokesperson said GNC has sold 440 million doses of DMAA since 2007 (unconfirmed by GNC). One CEO of a company which doesn't produce products using DMAA said sales have at least doubled since 1997, leading to a number around 227 million doses in 2011. At about $0.67 per dose, that may lead to $151 million or more in missed sales ($302 million if you're doubling). That's 7.3 percent of GNC's total sales for 2011.
Shares are down about 0.2 percent Friday morning.
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According to the report, the recent FDA call on stimulant dimethylamylamine, or DMAA, may hurt GNC's top- and bottom-line results. Though GNC didn't disclose DMAA sales, the product has seen tremendous growth across multiple outlets.
The ordeal started out when DMAA was first used as a decongestant in 1944, then a study in 1996 found different attributes for the geranium. Last December, the U.S. Defense Department pulled DMAA off of military base stores following two soldiers having heart attacks. Recently, in New Zealand, the peer-reviewed Annals of Emergency Medicine said there have been three documented cases of cerebral hemorrhage stemming from DMAA use.
The FDA said companies slinging DMAA have until May 18th to address its recently-issued warning letters on DMAA. But, how much might GNC miss out on?
According to the WSJ, one spokesperson said GNC has sold 440 million doses of DMAA since 2007 (unconfirmed by GNC). One CEO of a company which doesn't produce products using DMAA said sales have at least doubled since 1997, leading to a number around 227 million doses in 2011. At about $0.67 per dose, that may lead to $151 million or more in missed sales ($302 million if you're doubling). That's 7.3 percent of GNC's total sales for 2011.
Shares are down about 0.2 percent Friday morning.
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