ITEM 1. BUSINESS
SUMMARY
Medifast, Inc. (the “Company”
or “Medifast”) is a Delaware corporation, incorporated in 1993. The Company’s operations are primarily conducted
through six of its wholly owned subsidiaries, Jason Pharmaceuticals, Inc. ("Jason"), Take Shape For Life, Inc. (“TSFL”),
Jason Enterprises, Inc., Medifast Franchise Systems, Inc., Jason Properties, LLC and Seven Crondall, LLC. The Company is engaged
in the production, distribution, and sale of weight loss and weight management products and other consumable health and diet products.
Medifast product lines include weight loss and management, meal replacement, and vitamins. The Company has one modern, FDA-approved
manufacturing facility located in Owings Mills, Maryland.
MARKETS
Over the past 30 years, obesity in the
United States has dramatically increased. The obesity epidemic shows no signs of slowing down, with the condition worsening as
American waistlines continue to expand. Throughout the world, the World Health Organization estimates that approximately 1.6 billion
people are overweight. In the United States, approximately two-thirds of the population fall within the overweight or obese categories.
According to the Centers for Disease Control and Prevention (“CDC”), over 78 million U.S. adults are obese.
Obesity is defined as a Body Mass Index
(BMI) of 30 kg/m
2
or greater, whereas overweight is defined as a BMI ranging between 25 and 29.9 kg/m
2
. According to the CDC, zero states in the U.S. had a prevalence of obesity less than 20% in 2011 or 2010.
Furthermore, the CDC reported that thirty-nine states had a prevalence of obesity equal to or greater than 25%, and twelve states
had a prevalence of obesity equal to or greater than 30%.
According to the CDC, health conditions
related to obesity include heart disease, stroke, type 2 diabetes, and certain types of cancers. Obesity is not an age-specific
condition; the CDC showed children and adolescents are also affected. According to the CDC, the prevalence of obesity in children
and adolescents has almost tripled since 1980. Approximately 17% of children and adolescents are overweight or obese and are at
an increased risk of developing health problems such as high blood pressure, high cholesterol and type 2 diabetes.
According to the study, “Projection
of the year 2050 burden of diabetes in the US adult population: dynamic modeling of incidence, mortality, and prediabetes
prevalence1” published in 2010 in
Popular Health
, type 2 diabetes is expected to increase from 1 in 10 adults to between
1 in 3 and 1 in 5 adults between 2010 and 2050.
The primary factors contributing
to obesity are well-known: unhealthy food choices and lack of physical activity. Studies completed by the CDC reported Americans
incurred $147 billion in costs associated with obesity in 2008 and that average annual medical costs for those who are obese are
over $1,400 higher than those of people in normal weight ranges. The U.S. weight loss market itself is estimated to be a $65 billion
per year industry, including consumer spending on diet foods, drinks and low-calorie sweeteners; health clubs and workout videos;
medically supervised and commercial weight loss programs; children’s weight loss camps; diet books; appetite suppressants
and more. According to the Trust for America’s Health and The Robert Wood Johnson Foundation, half of U.S. adults will be
categorized as obese by 2030. The study also estimates that there could be 7.9 million new cases of diabetes each year compared
with 1.9 million new cases in recent years. The study also notes that there could be 6.8 million new cases of chronic heart disease
and stroke per year as compared with 1.3 million new cases per year now. Also according to this study, health conditions related
to obesity will result in an additional $66 billion in obesity related medical costs as compared to recent estimates of $147 billion.
Distribution Channels
Medifast
Direct –
In the direct-to-consumer channel (“Medifast Direct”), customers order Medifast product directly
through the Company’s website, www.medifast1.com
or our in-house call center. The product
is shipped directly to the customer’s home. This business is driven by an aggressive multi-media customer acquisition strategy
that includes both national and regional print, radio, web advertising, direct mail, and television as well as public relations,
word of mouth referrals, and social media initiatives. The Medifast Direct division focuses on targeted marketing initiatives and
provides customer support through its in-house call center and nutrition support team of registered dietitians to better serve
its customers. In addition, Medifast continues to use leading web technology featuring customized meal planning and web community
components. MyMedifast is a robust online community which provides a library of support articles, support forums, meal-planning
tools, and social media functions. See Note 13, “Business Segments” of the financial statements for a detailed breakout
of revenues, profit or loss, and total assets of each of the Company’s business segments.
Take Shape For Life™
–Take
Shape For Life is the personal coaching division of Medifast. The coaching network consists of independent contractor Health Coaches
(“Health Coaches”), who are trained to provide coaching and support to clients on Medifast weight-loss programs and
is led by its co-founder, a physician with a background in critical care. The role of the Health Coach is to give clients the encouragement
and mentoring to assist them to successfully reach a healthy weight. The Take Shape For Life program provides a road map to empower
the individual to take control of their health through adopting better long-term habits. Take Shape For Life offers the exclusive
proprietary BeSlim® philosophy, which encourages long-term weight maintenance. Take Shape For Life also moves beyond the scope
of weight loss to teach clients how to achieve optimal health through the balance of body, mind, and finances. The program uses
the high-quality, medically validated products of Medifast that have been proven safe and effective in clinical studies described
on page 8 under “Clinical Research Overview.” Health Coaches and their clients follow the Habits of Health book and
companion workbook written by the Take Shape For Life co-founder to create a lifelong health optimization program. In addition
to the encouragement and support of a Health Coach, clients of Take Shape For Life are offered a bio-network of support including
product and program information on our website, weekly medical and general support calls, and access to our registered dietitians.
Program entrants are encouraged to consult
with their primary care physician and a Take Shape For Life Health Coach to determine the Medifast program that is right for them.
Health Coaches are required to become qualified based upon testing of their knowledge of Medifast products and programs. Our Health
Coaches provide coaching and support to their Clients throughout the weight-loss and weight-maintenance process. Most new Health
Coaches are introduced to the opportunity by an existing Health Coach. The vast majority of our new Health Coaches started as weight-loss
clients of a Health Coach, had success on the Medifast product and program, and became a Health Coach to help others through the
weight-loss process. Approximately 20% of active Health Coaches in the Take Shape for Life network are health care providers.
Take Shape For Life Health Coaches are
independent contractors who are compensated on product sales referred to the Company. Health Coaches can earn compensation in two
ways:
|
·
|
Commissions: The primary way a Health Coach is compensated is through earning commissions on product
sold. Health Coaches earn commissions by referring product sales through their own replicated website or through the Company’s
in-house call center. The clients of Health Coaches are responsible for ordering and paying for products, and their order is shipped
directly from the Company to the client’s home or designated address. Our Health Coaches do not handle payments and are not
required to purchase or store products in order to receive a commission. In addition, Health Coaches do not receive a commission
on their own personal product orders. Health Coaches pay the same price for products as their clients. The Company pays retail
commissions to qualified Health Coaches on a weekly basis.
|
|
·
|
Bonuses: Health Coaches are offered several bonus opportunities, including growth bonuses, generation
bonuses, elite leadership bonuses, rolling consistency bonuses, client acquisition bonuses, and new Health Coach assist bonuses.
The purposes of these bonuses are to reward Health Coaches for successfully referring product sales to the Take Shape For Life
network, and to incentivize Health Coaches to further support and develop other Health Coaches within their network. The Company
pays bonuses on a monthly basis to qualified Health Coaches.
|
|
o
|
Growth bonuses are paid to Health Coaches who have at least five ordering clients per month and
who have generated over $1,000 in product sales per month. Monthly growth bonuses are incremental bonuses that enable Health Coaches
to earn income on product orders placed by clients or Health Coaches within their network.
|
|
o
|
Generation bonuses are paid to Health Coaches who have one or more Health Coaches in their business
who have achieved the rank of Executive Director. An Executive Director is a Health Coach who either generates $6,000 a month in
frontline product sales to either Clients or personally sponsored Health Coaches or personally sponsors five senior Health Coaches.
A senior Health Coach is a Health Coach who generates at least $1,000 a month in group product sales from a combination of at least
five personally enrolled, ordering Clients, and/or Health Coaches, Health Coach teams, or a combination of both.
|
|
o
|
Elite leadership bonuses are paid to Health Coaches who have three or more Health Coaches in their
business who have achieved the rank of Executive Director.
|
|
o
|
Rolling consistency bonuses are paid to Health Coaches who display frontline product sales with
order consistency month after month. Health Coaches who generate at least $2,000 or more in frontline product sales for three consecutive
months are paid a rolling consistency bonus.
|
|
o
|
Client acquisition bonuses are paid to new Health Coaches who develop five Clients and generate
$1,000 in frontline product sales within their first 30 calendar days in Take Shape for Life program.
|
|
o
|
The assist bonuses are paid to Health Coaches who assist a newly sponsored Health Coach attain
the Client acquisition bonus.
|
Health Coaches do not earn a commission
or bonus when they recruit a new Health Coach into the Take Shape For Life network. Fees paid by new Health Coaches for start-up
materials are at the Company’s approximate cost and no commissions are paid thereon.
Take Shape For Life is a member of the
Direct Selling Association (the “DSA”), a national trade association representing over 200 direct selling companies
doing business in the United States. To become a member of the DSA, Take Shape For Life, like other active DSA member companies,
underwent a comprehensive and rigorous one-year company review by DSA legal staff that included a detailed analysis of its company
business-plan materials. This review is designed to ensure that a company’s business practices do not contravene DSA’s
Code of Ethics. Compliance with the requirements of the Code of Ethics is paramount to becoming and remaining a member in good
standing of DSA. Accordingly, we believe membership in DSA by Take Shape For Life demonstrates its commitment to the highest standards
of ethics and a pledge not to engage in any deceptive, unlawful, or unethical business practices. Among those Code of Ethics proscriptions
are pyramid schemes or endless chain schemes as defined by federal, state, or local laws. Moreover, Take Shape For Life, like other
DSA member companies in good standing, has pledged to provide consumers with accurate and truthful information regarding the price,
grade, quality, and performance of the products Take Shape For Life markets. See Note 13, “Business Segments” of the
financial statements for a detailed breakout of revenues, profit or loss, and total assets of each of the Company’s business
segments.
Medifast Weight Control Centers
–
The Medifast Weight Control Center is the brick and mortar clinic channel of Medifast with locations in
Pennsylvania, New Jersey, Delaware, Texas, Florida, Maryland, North Carolina and Virginia. In 2012, the Company opened 19 new
Medifast Weight Control Centers, closed two existing centers, and had a total of 87 locations in operation at year-end. The
centers offer a high-touch model including comprehensive Medifast programs for weight loss and maintenance, customized
patient counseling, an Inbody™ composition analysis, and monitoring with a BodyGem™ resting metabolic rate
measurement device. Medifast Weight Control Centers conduct local advertising including radio, print, television and web
initiatives. The centers also benefit from the nationally advertised brand which encourages walk-ins and referrals from its
customers and other Medifast business channels.
In 2008, the Company began offering the
clinic model as a franchise opportunity. The Company currently has franchisee centers located in Alabama, Arizona, California,
Louisiana, Minnesota, Wisconsin, Maryland and Pennsylvania. At December 31, 2012, 35 franchise locations were in operation.
Medifast currently offers the Medifast
Weight Control Center franchise opportunity in all States except Hawaii, North Dakota, and South Dakota, under an approved franchise
disclosure document (FDD). The FDD requires a successful applicant to develop a minimum of three Medifast Weight Control Centers
within a defined geographic area in the time frame set forth in the area development agreement between Medifast and the franchisees.
Our franchise strategy depends on our franchisees’
active involvement in and management of Medifast Weight Control Center operations. Candidates are reviewed for appropriate operational
experience and financial stability, including specific net worth and liquidity requirements. Upon franchisee approval, they shall
promptly select sites for the Centers and shall request Franchisor’s approval of such selection based on guidelines, terms,
and conditions.
A franchisee’s initial fee covers
the cost of Company resources provided to train applicants and staff, and determine territory for development. If a successful
applicant desires to open more than three centers in the designated territory, there is an additional fee for each location over
the three to be developed. The Company provides initial investment estimates in the FDD and cautions applicants considering the
franchise opportunity that their actual expenses may vary from the estimates given. Legal disclosures are given and the applicant
cannot sign the Agreement until he/she has had 14 days to consider the FDD.
Prior to the opening of each Medifast Weight
Control Center franchise established under the area development agreement, the Company will do the following:
|
i.
|
designate the Center’s Protected Territory.
|
|
ii.
|
if the Company has not already approved a site that the franchisee has selected before signing
the Franchise Agreement, designate the area within which the franchisee will locate the Center and approve the site the franchisee
has selected for the location of the Center.
|
|
iii.
|
if the Company has not already approved a site before signing the Franchise Agreement, review and
approve the franchisee lease or purchase agreement for the site for the approved location.
|
|
iv.
|
provide the franchisee with standard plans and specifications for the build-out of the Center along
with a list of equipment and improvements which the franchisee is required to purchase and install.
|
|
v.
|
provide an initial training program.
|
|
vi.
|
provide the franchisee on-site assistance and guidance for approximately three to five days during
or close to the opening of the Center.
|
|
vii.
|
provide the franchisee with online access to a password-protected, electronic version of the Medifast
Weight Control Centers® Franchise Operations Manual.
|
No products or equipment are provided at
a discounted purchase price. In addition, the Company does not offer direct or indirect financing. We do not guarantee franchisee’s
notes, leases or obligations.
While the Company does not currently have
a purchase option included in its franchise agreement, the Company does have the right of first refusal to acquire a Center if
the franchisee wishes to sell or defaults on their obligations. See Note 13, “Business Segments” of the financial statements
for a detailed breakout of revenues, profit or loss, and total assets of each of the Company’s business segments.
MEDIFAST WHOLESALE PHYSICIANS
- Medifast
physicians have been implementing the Medifast Program within their practice or clinic since 1980. These physicians carry an inventory
of wholesale Medifast products and resell them to patients. They also provide appropriate medical monitoring, testing, and support
for patients on the Medifast Program. Medifast products and programs have been recommended by over 20,000 doctors since 1980. Many Medifast physicians take advantage of the Medifast Direct or the Take Shape For Life program to support their patient
base.
The Company offers an in-house support
program to assist the physicians and their customers/patients. Customers have access to registered dietitians who provide program
support and advice via a toll-free telephone help line, by email, and online chats. See Note 13, “Business Segments”
of the financial statements for a detailed breakout of revenues, profit or loss, and total assets of each of the Company’s
business segments.
SEASONALITY
The Company's weight management products
and programs have historically been subject to seasonality. Traditionally the holiday season in November/December of each year
is considered poor for diet control products and services. January and February generally show increases in sales, as these months
are considered the commencement of the “diet season.”
INTERNATIONAL
On June 13, 2012, the Company announced
a 3-year strategic partnership with Productos Medix S.A. de C.V. (“Medix”), a leader in pharmaceutical obesity products
in Mexico. The agreement grants Medix an exclusive license for the distribution of Medifast products and programs through physicians
and weight control centers in Mexico under the Medifast Brand.
Medix is a leading pharmaceutical manufacturer
and distributor in Mexico with over 55 years of experience, specializing in comprehensive health care solutions to aid in the struggle
against obesity. Medix offers a wide range of weight control products and also conducts business in Central and South America.
On December 17, 2012 the Company and Medix,
under an exclusive 5-year licensing agreement, announced plans to increase distribution of Medifast meal replacement products and
programs beyond Mexico and into Argentina, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala,
Honduras, Nicaragua, Panama, Paraguay, Peru, Venezuela, and Uruguay beginning in January 2013.
The Company continues to explore additional
international expansion opportunities.
THE MEDIFAST® BRAND
Medifast enriches lives by providing clinically
proven weight loss and weight management products and programs. Medifast offers clinically proven products and programs for weight
management, weight maintenance, and long-term health through multiple channels of distribution. Medifast products are high-quality,
portion-controlled meal-replacement foods.
The Medifast Program is suitable for individuals
with type 2 diabetes and offers products with a nutritionally complete and low-glycemic formulation. Portion-controlled, meal-replacement
weight-management programs are continuing to gain popularity, as consumers search for a safe and effective solution that provides
balanced nutrition, effective weight loss, and valuable behavior-modification education.
Clinical Research Overview
Medifast relies upon both clinical research
studies that have been completed over the span of the last two decades, and retrospective data from its Medifast Weight Control
Centers to support its “clinically proven” claim. In each study conducted by Medifast, the investigator follows the
scientifically recognized protocols approved by an Institutional Review Board, a committee formally designated to approve, monitor,
and review biomedical and behavioral research involving humans with the aim to protect the rights and welfare of research subjects,
prior to initiating the study. Those protocols outline the study parameters and determination of a statistically valid sample of
study participants. The following abstracts include both peer-reviewed research (consisting of prospective controlled clinical
trials and retrospective studies) and in-house clinical data (studies 9 and 10).
For each of the below peer-reviewed publications,
the reviewers were chosen by the publishing journal, and except in the case of Study 2, were not disclosed to Medifast. Each reviewer
is independent and has no association with Medifast or its affiliates.
Sample sizes for the studies described
below varied from 14 to 1,445 participants. The smallest study was a statistical review of patient charts, while the largest study
was a retrospective review of patient charts from a weight-loss clinic, which allows for greater generalization of the protocol
used in the clinic as an effective weight-management program for individuals seeking weight loss. The remaining studies had sample
sizes ranging from 30 to 217 participants.
Each study included a wide range of individuals
as part of the study population. All of the studies included both male and female participants, except for Studies 8 and 11, which
included females only. Additionally, race or ethnicity were not exclusory for any of the studies, and the age range for inclusion
across the studies included children, adolescents, and adults, allowing for adequate generalization and support for the study conclusions.
Each peer-reviewed publication included
as part of its study design, a sample size and power calculation to detect statistically significant and clinically meaningful
differences. Moreover, well-established statistical analyses, such as paired and student’s T-tests; Wilcoxon signed-rank
tests; random effects logistic regression; and descriptive statistics (means and standard deviations) at the time of publication
were used as part of the methodology and were vetted as part of the peer-review process. Conclusions drawn from the study results
were further evaluated and approved as part of the peer-review process.
As a whole, commonality of results from
the studies do allow general conclusions for each study’s findings principally regarding Medifast products and programs as
safe and effective weight loss, with improvements in risk factors for cardiovascular disease in otherwise healthy, overweight and
obese individuals.
Study 1
Reference
Coleman, C., Kiel, J., Hanlon-Mitola, A.,
Sonzone, C., Fuller, N., & Davis, L. (2012). Use of the Medifast meal replacement program for weight loss in overweight and
obese clients: A retrospective chart review of three Medifast Weight Control Centers (MWCC).
Food and Nutrition Sciences
,
Vol. 3 No. 10, pp. 1433-1444. doi: 10.4236/fns.2012.310187.
Purpose
A chart review was performed to evaluate
the effectiveness of the Medifast 5 & 1 Plan in three Medifast Weight Control Centers on body weight, body composition, and
other health measures at 4, 12, 24 weeks, and final weight loss visit. A secondary objective was to evaluate the association between
compliance and the effectiveness of the Medifast MD on body weight from baseline to final weight loss visit.
Methods
The total number of charts included in
the analysis is 446. A total of 730 were reviewed and 284 were removed based on the exclusion criteria. Client charts were included
if the following criteria were met: adult males and females aged 18 - 70 years, were following the Medifast 5 & 1 Plan, had
a BMI ≥ 25 kg/m
2
, entered a weight management program at one of the three selected Medifast Weight Control Centers
locations between 2007 and 2010, and had a signed health information consent form.
Exclusion criteria were as follows: following
a plan other than the Medifast 5 & 1 Plan, completed the initial consultation but did not participate further, did not get
baseline labs performed, the program was stopped for medical reasons unrelated to the MD Plan, no signed health information consent
form or the presence of a written request to revoke consent, or if clients were currently an active participant at the Medifast
Weight Control Centers.
Data were collected electronically and
included weight, systolic and diastolic blood pressure, pulse, lean muscle mass (LMM), body fat mass, % body fat, and abdominal
circumference. Compliance measures included attendance at weekly visits, intake of meal replacements and supplements, food journals,
and ketone testing.
Results
Significant weight loss and % weight loss
were achieved at all time points with clinically significant weight loss (>5%) occurring in just 4 weeks. Additionally, significant
improvements in body composition were seen at all time points coupled with increases in % total body weight as LMM (% LMM improved
by 3.5%, 9.8%, 16.0%, and 13.9%, respectively). Blood pressure and pulse were significantly improved, demonstrating the clinical
benefit for clients. Multivariate regression revealed a strong inverse relationship between weight change, % compliance with attendance,
and the number of weeks that MRs were taken as recommended.
Conclusion
The Medifast meal replacement plan, combined
with the support and accountability available in the Medifast Weight Control Centers, is an efficacious program that promotes significant
weight loss and improvements in body composition. These results reveal significant associations between components of compliance
and weight loss, but particularly highlight the importance of attendance, a focus of the Medifast Weight Control Centers model
compared to non-clinic models.
The results of this study were presented
at Experimental Biology, 2012.
Journal Description:
Food and Nutrition Sciences is a peer reviewed
international journal dedicated to the latest advancement in related areas. The goal of this journal is to keep a record of the
state-of-the-art research and to promote study, research and improvement within its various specialties.
Impact Factor: 0.17
Study 2
Reference
Davis, L. M., Coleman, C., Kiel, J., Rampolla,
J., Hutchisen, T., Ford, L., Anderson, W. S., Hanlon-Mitola, A. (2010). Efficacy of a meal replacement diet compared to a food-based
diet after a period of weight loss and weight maintenance: a randomized controlled trial.
Nutrition Journal,
9 (11).
Purpose
To examine the effect of Medifast’s
meal replacement program on body weight, body composition, and biomarkers of inflammation and oxidative stress among obese individuals
following a period of weight loss and weight maintenance compared to an isocaloric, food-based diet.
Methods
This 40-week randomized, controlled clinical
trial included 90 obese adults assigned to one of two weight loss programs for 16 weeks and then followed for a 24-week period
of weight maintenance. Subjects were randomly assigned to 2 groups: Medifast (MD) (n=45; 30 women, 15 men; BMI 38.5 ± 6.8)
and food-based (FB) (n=45; 34 women, 11 men; BMI 37.8 ± 4.5). Subjects met biweekly with registered dietitians to have anthropometrics
measured and for dietary and behavior counseling during weight loss and every 12 weeks during weight maintenance. Weight and blood
pressure were measured bi-weekly during weight loss and every 12 weeks during weight maintenance. Waist circumference, % body fat,
lean muscle mass, visceral fat, and pulse were measured every 4 weeks during weight loss and every 12 weeks during weight maintenance.
Biomarkers for inflammation (C-reactive protein) and oxidative stress (urine lipid peroxides) and lipid panels were measured at
baseline, 16 weeks, and 40 weeks.
Participants with known allergies to soy,
wheat, gluten and nuts were excluded from the study because some Medifast meal replacements contain these ingredients. To limit
the effect of alcohol on calorie intake and its potential effect on compliance, participants were enrolled in the study if they
consumed <14 alcoholic beverages per week and agreed to avoid alcohol intake during the study. Participants were not currently
using appetite-affecting medications (e.g. selective serotonin reuptake inhibitors (SSRIs), steroids, Ritalin), and were not pregnant
or lactating. Participants were required to have a normal electrocardiogram (EKG) and lab work within the past year as well as
the permission of their primary care provider to enroll in the study. Additional exclusion criteria included individuals that were
actively dieting; had chronic uncontrolled health problems (not including obesity or diabetes); had a pacemaker or other internal
electronic medical device; reported schizophrenia, history of bipolar disorder, or a current major depressive disorder; had dependence
on alcohol or sedative-hypnotic drugs; had a cognitive impairment severe enough to preclude informed consent; or who were currently
taking weight loss or appetite affecting medications. Major eating disorders were screened using the Eating Attitudes Test (EAT).
A score of > 30 was exclusionary.
Results
Weight loss at 16 weeks was significantly
better in the MD versus the FB (12.3% vs. 6.7%), and while significantly more weight was regained during weight maintenance, overall
greater weight loss was achieved on MD. Significantly more of the MD participants lost ≥5% of their initial weight at week 16
(93% vs. 55%) and week 40 (62% vs. 30%). Significant improvements in body composition were also observed in MD participants compared
to FB at week 16 and week 40.
Both the Medifast and food-based group
experienced a significant improvement in C-reactive protein (CRP) at week 40. However, when a dichotomous variable was used to
characterize baseline CRP levels as low or high, the only sub-group to experience a significant decrease over the 40 weeks was
the Medifast group with high baseline CRP levels. The Medifast group experienced a significant decrease in urine lipid peroxides
at week 40 whereas the food-based group did not. Additionally, there was a significant mean decrease over time in the Medifast
group that was not found for the food-based group.
Conclusion
Our data suggest that the meal replacement
diet plan evaluated was an effective strategy for producing robust initial weight loss and for achieving improvements in a number
of health-related parameters during weight maintenance, including inflammation and oxidative stress, two key factors more recently
shown to underlie our most common chronic diseases.
The 16 week results of this study were
presented at Experimental Biology, 2009. The 40 week results were presented at the Food and Nutrition Conference and Expo, 2009.
Journal Description:
Nutrition Journal is an open access, peer-reviewed,
online journal that considers manuscripts within the field of human nutrition. The assumed viewer base is nutrition professionals
and researchers. The audience size is not available.
Study 3
Reference
Cheskin, L. J., Mitchell, A. M., Jhaveri,
A. D., Mitola, A. H., Davis, L. M., Lewis, R. A., Yep, M. A., Lycan T.W. (2008). Efficacy of meal replacements versus a standard
food-based diet for weight loss in type 2 diabetes: a controlled clinical trial.
The Diabetes Educator,
34(1), 118-127.
Purpose
To compare the efficacy of a portion-controlled
meal-replacement diet to a standard diet (based on recommendations by the American Diabetes Association) in achieving and maintaining
weight loss among obese men and women with type 2 diabetes mellitus.
Methods
This study is a university-based, controlled
clinical trial. Participants were 119 men and women with diabetes and a body mass index between 25 and 40 kg/m
2
, assigned
randomly to one of two 34-week, 75% of predicted energy need diets (portion controlled (PCD) or standard (SD), self-selected, food
based) and then followed for 1 year of weight maintenance.
Participants were 119 men and women aged
18 to 70, diagnosed by standard criteria with type 2 diabetes at least 3 months prior to enrollment, and were overweight or obese,
with a BMI of 25 to 40 kg/m
2
, assigned randomly to one of two 34-week, 75% of predicted energy need diets (portion controlled
(PCD) or standard (SD), self-selected, food based) and then followed for 1 year of weight maintenance. If they were currently taking
medications to control diabetes, a stable dose for at least 3 months prior to randomization was required. Participants needed the
permission of their primary care provider and a normal EKG or abnormalities that were deemed medically acceptable.
Individuals with uncontrolled health problems
(aside from obesity and diabetes), type 1 diabetes, bulimia nervosa, laxative/substance abuse, alcohol intake > 10 drinks per
week, or uncontrolled psychiatric disorders (e.g., major depression, bipolar disorder) were excluded. Depression was assessed using
the Beck Depression Inventory; a score of >15 was exclusionary. Major eating disorders were screened using the Eating Attitudes
Test (EAT). A score of >30 was exclusionary. Use of appetite-affecting medications (e.g., certain antidepressants, steroids)
unless on a stable dose for >3 months or weight loss drugs were excluded, as were women who were lactating, pregnant, or seeking
pregnancy.
Results
Using intention-to-treat analyses, weight
loss at 34 weeks and weight maintenance at 86 weeks was significantly better on the PCD versus SD. Approximately 40% of the PCD
participants lost >5% of their initial weight compared with 12% of those on the SD. Significant improvements in biochemical
and metabolic measures were observed at 34 weeks in both groups. The retention rate and self-reported ease of adherence in the
PCD group were significantly higher throughout the study.
Of the 112 participants who began the diet,
48 completed the 34-week active weight loss phase (31 of 54 from the PCD group and 17 of 58 from the SD group: 57.4% vs. 29.3%).
After the 34-week active phase, weight loss amongst completers was 6.84% (7.3 ± 6.2 kg) on the PCD vs. 3.70% (3.7 ±
3.2 kg) on the SD. Nineteen of 31 (61.3%) PCD participants lost ≥5% of their initial body weight vs. 4 of 17 (23.5%) SD participants.
Nine of 31 (29.03%) PCD participants lost ≥10% vs. 1 of 17 (5.88%) SD participants. BMI was significantly reduced in both groups
at 34 weeks, but the change in BMI was significantly greater in the PCD vs. SD group.
Significantly more PCD participants were
able to reduce their use of medications to control type 2 diabetes after 34 weeks. Of those participants beginning the study using
medications for blood glucose control, 7 of 29 (24.1%) PCD participants reduced their use of medications compared to 0 of 13 (0%)
SD participants.
Conclusions
Participants using meal replacements lost
twice the amount of weight, experienced less weight regain after 1 year of maintenance, and were more likely to complete the program
than SD participants. As PCDs may help obese patients with type 2 diabetes adhere to a weight loss program and reduce medication
use, health professionals should consider recommending them as part of a comprehensive approach to weight management.
The study was presented at the American
Diabetes Association’s 65th Annual Scientific Session, 2005.
Journal Description:
The Diabetes Educator (TDE) is the official
journal of the American Association of Diabetes Educators (AADE). It is a peer-reviewed journal intended to serve as a reference
source for the science and art of diabetes management. TDE publishes original articles that relate to aspects of patient care and
education, clinical practice and/or research, and the multidisciplinary profession of diabetes education as represented by nurses,
dietitians, physicians, pharmacists, mental health professionals, podiatrists, and exercise physiologists.
Impact Factor: 1.959
Ranked: 82 out of 122 in Endocrinology
& Metabolism
Source: 2011 Journal Citation Reports®
(Thomson Reuters, 2012)
Study 4
Reference
Haddock, C. K., Poston, W. S. C., Foreyt,
J. P., Dibartolomeo, J. J., (2008). Effectiveness of Medifast supplements combined with obesity pharmacotherapy: A clinical program
evaluation.
Eating and Weight Disorders,
13(2), 95-101.
Purpose
To evaluate the long-term impact of Medifast
meal-replacement supplements combined with appetite-suppressant medication (ASM) among participants who received 52 weeks of treatment
as part of a medically supervised weight-control program.
Methods
This study provides a systematic program
evaluation of weight loss data from a medically-supervised weight control program combining the use of MMRS and ASM. Data were
obtained and analyzed from 1,351 patient (BMI ≥ 25) medical charts who had participated for at least 12 weeks of treatment.
Outcomes included weight loss and percent weight loss from baseline at 12, 24, and 52 weeks. Both completers and intention-to-treat
(ITT) analyses were conducted. Completers (i.e., those with complete data for 52 weeks) outcomes were evaluated after stratification
for reported adherence to the MMRS and ASM.
Participants were part of a fee-based medical
clinic for the purpose of losing weight using a diet-medication protocol. Exclusion criteria from this study included enrollment
in treatment for less than 12 weeks, less than 18 years of age, current use of MAO inhibitors, cardiac disease, severe hypertension,
kidney disease, renal failure, asthma, liver disease, cancer therapy and eating disorders.
Results
Participants who completed 52 weeks of
treatment experienced substantial weight losses at 12 (-9.4 ± 5.7kg), 24 (-12.0 ± 8.1kg), and 52 weeks (12.4 ±
9.2kg), and all measures were significantly different from baseline weight (p<0.001 for all contrasts) for both true completers
(n=324) and for ITT analysis (n=1,351). Fifty percent of patients remained in the program at 24 weeks and nearly 25% were still
participating at one year.
Conclusion
This weight loss program using a combination
of MMRS and ASM produced significant and sustained weight losses at 52 weeks. Results were better than those typically reported
for obesity pharmacotherapy in both short- and long-term studies and also better than those reported for partial meal replacement
programs. Program retention at on year was similar to that reported in many controlled drug trials and better than most commercial
programs reported in the literature.
Results of this study were presented at
the American Society of Bariatric Physicians’ annual meeting in May 2007.
Journal Description:
Eating and Weight Disorders - Studies on
Anorexia, Bulimia and Obesity is a scientific journal whose main purpose is to create an international forum devoted to the several
sectors of eating disorders and obesity and the significant relations between them.
Study 5
Reference
Davis, L. M., Coleman. C. D., Anderson,
W. S., Cheskin, L. J. (2008). The effect of metabolism-boosting beverages on 24-hr energy expenditure.
The Open Nutrition Journal,
2, 37-41.
Purpose
To evaluate the effectiveness of thermogenic
meal-replacement beverages (TMRB) containing 90 mg of epigallicocatechin gallate (EGCG) and 100 mg of caffeine on resting energy
expenditure (REE), fat oxidation, and appetite.
Methods
Thirty adults (19 women, 11 men between
the ages of 18 and 65 years) were stratified into 3 groups: lean (n=10, BMI 21.5 ± 2.1); overweight/obese (OW) (n=10, BMI
29.8 ± 2.7); or weight maintainers (WM) (n=10, BMI 28.8 ± 4.0). WM had maintained a weight loss of ≥5% for at
least a 3-month period. Following an overnight fast, baseline measurements, including REE via indirect calorimetry, were performed.
REE was repeated at 30, 60, 90, and 120 minutes after consuming a TMRB. Appetite was assessed via visual analogue scale at baseline,
30 minutes, and 120 minutes after consuming the TMRB.
Exclusion criteria included current cigarette
smoking, consuming >14 alcoholic beverages per week (or any the day prior to study days), chronic uncontrolled health problems
(not including obesity or diabetes); drug or alcohol dependence, mental illness (schizophrenia, bipolar disorder, current major
depressive disorder), taking medications that would affect appetite or metabolism (e.g. steroids, Ritalin); active dieting; pregnancy
or lactation; and allergy to wheat, gluten, soy or nuts.
Results
Mean 24-hour REE was increased 5.9 ±
2.5% overall (p=0.000), 5.7 ± 3.1% among lean subjects (p=0.0002), 5.3 ± 1.4% among OW subjects (p=0.000), and 6.8
± 2.7% among WM subjects (p=0.0007). Appetite was significantly reduced 30 minutes after consuming the TMRB (p=0.0002).
There was an overall trend toward increased fast oxidation with respiratory quotient decreasing from 0.99 ± 0.19
to 0.92 ± 0.13 (p=0.122).
Conclusion
The study results show that ingestion of
thermogenic meal-replacement beverages increase resting energy metabolism and decreases appetite. The findings strongly suggest
TMRBs are a promising weight-control tool. These decreases in energy intake and increases in energy expenditure may translate into
more sustainable weight loss and weight maintenance in both the short- and long-term.
This study was presented as a poster session
at Experimental Biology, 2008.
Journal Description:
The Open Nutrition Journal is an Open Access
online journal, which publishes research articles, reviews, and letters in all areas of experimental and clinical nutrition research.
The articles printed in this journal are accessible to anyone and everyone.
Study 6
Reference
Cheskin, L. J., Hanlon-Mitola, A., Mitchell,
A., Jhaveri, A., Yep, M., Mitchell, V. (2007). A RCT comparing balanced energy deficit diets with or without meal replacements
for weight loss and maintenance among children dieting alone or with a parent.
The Journal of the Federation of American Societies
for Experimental Biology,
21, 214.
Purpose
To compare the safety and efficacy of supplemental
Medifast portion-controlled meal replacements to a USDA Food Guide Pyramid-based diet among children dieting alone or with a parent.
Methods
This 18 month randomized, controlled trial
included 80 overweight (BMI > 95th percentile on BMI-for-age growth charts) boys and girls between the ages of 8 and 15 years
and 40 parents randomly assigned to one of two weight loss programs for 6 months and then followed for a 12 month period of weight
maintenance. Subjects were further randomized to dieting alone or with a parent. Both weight-loss diets (MR and USDA) were 20%
energy-restricted (~500 kcal deficit). Those randomized to the MR diet incorporated 3 MRs/day during the active weight loss phase
and 2 MRs/day during the maintenance phase. Participants reported to the research clinic every other week to weigh-in, attend educational
group sessions, and receive MRs.
Results
By intention to treat analysis, dieting
alone vs. with a parent or food vs. MR made no difference in weight outcome. However, following initial weight loss (6 mos) and
1 yr maintenance (18 mos), significant benefits were seen in the MR group in BMI%ile (0 mos=98.8 ± 1.0, 6 mos=96.6 ±
3.2, 18 mos=96.4 ± 3.4); body fat ( 5.9% @ 6 mos, 5.3% @ 18 mos); total cholesterol ( 6.7% @ 6 mos, 5.6% @ 18 mos); LDL
( 19.8% @ 6 mos, 7.9% @ 18 mos); and triglycerides ( 23.6% @ 6 mos, 22.3% @ 18 mos). Although not found to be significant, drop-out
rates were higher in the Food group (43.6%, 35.9%, 10.25%) vs. the MR group (59.0%, 48.7%, 15.4%) at 12 weeks, 6 mos., and 18 mos.,
respectively. No significant between-group differences, differences in growth rates, or adverse events were observed.
Conclusions
Among overweight 8 – 15 year olds,
dieting with or without a parent, meal replacements were as safe and effective as a USDA food-based diet for weight loss and maintenance.
Similar results were also seen with other anthropometrics studied. Dieting with a parent made no difference in weight outcomes.
It was determined from these data that an MR diet in children was both safe and efficacious. The safety of an MR diet in children
was determined by the absence of adverse events in the children during the entire 18 month period of the study.
This study was presented as a poster session
at Experimental Biology, 2007.
Journal Description:
Founded in 1912, the Federation of American
Societies for Experimental Biology (FASEB) was originally created by three independent scientific organizations to provide a forum
in which to hold educational meetings, develop publications, and disseminate biological research results. FASEB publishes its own
journal as well as helps other non-profit organizations publish their own journals. FASEB aims to provide a wealth of information
not just to scientific organizations, but also to the general public, so that more people remain informed about the issues and
policies affecting the advancement of biological and biomedical sciences.
Study 7
Reference
Matalon, V. (2000) An evaluation of weight
loss following a carbohydrate and fat restricted diet with appetite suppressant and dietary supplementation.
The Bariatrician,
10-13.
Purpose
To assess the safety and effectiveness
of a weight-loss regimen consisting of a carbohydrate- and fat restricted diet supplemented with an appetite suppressant, a dietary
supplement, and a liquid protein drink (Medifast) in an open label trial.
Methods
This 6 month open label trial included
47 overweight or obese (BMI ≥ 25.0 kg/m
2
) participants over the age of 18. Participants were seen and evaluated weekly.
At each weekly visit, participants were evaluated for total body weight, body composition (% body fat, BMI, lean body mass, water
weight) and blood pressure. Patients were considered eligible for the trial if they were over the age of 18, and were considered
overweight or obese based on a body mass index (BMI) ≥ 25.0 kg/m
2
.
Results
Of 47 patients enrolled, 24 (51%) completed
six months using the dietary regimen prescribed. Data was analyzed for all patients who were treated with the diet, as well as
for the subset of patients who completed the entire study period. Baseline and 6-mos evaluations of body weight (lbs), body fat
(%), BMI (kg/m
2
), lean body mass, water weight, and blood pressure were performed. At 6 mos, statistically significant
differences were found for body weight (p<0.001), percent body fat (p<0.001), BMI (p<0.001), lean body mass (p<0.001),
water weight (p=0.01), and body systolic (p=0.003) and diastolic (p<0.001) blood pressure.
Conclusions
The study demonstrated that a carbohydrate-
and fat restricted program supplemented by a natural appetite suppressant can lead to progressive weight loss of comparable value
to prescribed pharmacologic agents at the time of study. Patients experienced statistically significant decreases in overall body
weight, percent body fat, BMI, lean body mass, total body water, and both systolic and diastolic blood pressure.
Journal Description:
American Society of Bariatric Physicians
(ASBP) is a leading national professional organization providing physicians and other health professionals with education in the
medical management of weight loss and related medical conditions.
Study 8
Reference
Yuh, J., Debrakeleer, D., McIntyre, W.,
Coleman C., Fox L., Barmat, L. (2011). Efficacy of a hypocaloric weight management program in obese women with polycystic ovarian
syndrome (PCOS) [abstract]. 9th Annual Meeting of Androgen Excess & PCOS Society; 2011 Oct 13 – 15, Abstract nr 21.
Purpose
To evaluate the efficacy of a hypocaloric
diet program utilizing a health coach on body weight and changes in biochemical and metabolic profiles in obese PCOS patients
Methods
This was a prospective study conducted
in a teaching community hospital. Subjects were obese (BMI 33.1 ± 3.0), adult, non-pregnant women ages 20-39 (27.7 ±
6.1) with PCOS defined by Rotterdam criteria. Subjects were eligible if they were free of hormonal medications for ≥ 3 months,
were nonsmokers, and did not have diabetes or hypertension. For 3 months patients followed a 1000 calorie diet plan with the guidance
of a health coach consisting of 5 Medifast meals and one self-prepared meal. Meetings with the health coach, weight measurement,
and lab draws occurred on a monthly basis. The primary outcome was change in body weight; secondary outcomes were biochemical and
metabolic changes. Paired t-tests were used to examine the longitudinal changes from baseline. Significance was defined as P <
0.05.
Results
Eleven subjects completed the study. The
hypocaloric diet resulted in significant decline in body weight (-18.2 ± 6.85 lbs; p<0.0001), 2-hour oral glucose (-23.0
± 22.4 mg/dl; p=0.010), 2-hour insulin (-79.1 ± 76.6 ųIU/ml; p=0.022), and calculated free androgen index (-3.7
± 2.54; p=0.017). There was a marginally significant increase in SHGB (+9.2 ± 14.1 nmol/L; p=0.069). For subjects
with elevated levels at baseline, significant improvements were found in total cholesterol (-37.0 ± 13.90 mg/dl; p=0.013),
LDL cholesterol (-28.0 ± 10.80 mg/dl; p=0.014), and triglycerides (-90.0 ± 1.41 mg/dl; p=0.007). Overall, 1/3 of
previously anovulatory women began ovulating and 7 out of 11 began regular menstruation.
Conclusions
Significant improvements in body weight
and biochemical and metabolic markers were achieved in obese PCOS subjects after 3 months following a hypocaloric portion controlled
diet plan under the guidance of a health coach making conditions more favorable for ovulation.
Journal Description:
The results of this study were presented
at the 9
th
Annual Meeting of Androgen Excess & PCOS Society, 2011.
The Androgen Excess and PCOS Society is
an international organization dedicated to promoting knowledge, and original clinical and basic research, in every aspect of androgen
excess disorders.
Study 9
Reference
Crowell, M. D., Cheskin, L. J., (1993).
Multicenter evaluation of health benefits and weight loss on the Medifast weight management program: A statistical review of patient
charts.
Unpublished Data on File.
Purpose
To retrospectively evaluate the efficacy
of a medically supervised, protein-supplemented modified program (Medifast) for weight reduction and to evaluate the impact of
weight reduction on coexisting health problems.
Methods
This study provides a systematic evaluation
of weight loss data randomly selected from a medically-supervised weight control center. Data was obtained and analyzed from patient
medical charts that had completed at least 16 weeks of the program. Outcomes included weight loss, blood pressure, and blood lipids.
Results
The combined sample lost an average of
49.5 ± 24.2 lbs and were in the program an average of 21.3 ± 7.7 weeks. Males lost an average of 64.8 ± 29.2
lbs and females lost an average of 47.3 ± 22.5 lbs. The study found significant reductions in total cholesterol and triglycerides,
systolic and diastolic blood pressure, and normalized blood pressure in hypertensive patients.
Conclusions
Medically supervised, protein-sparing meal-replacement
programs offer a safe and effective means of weight reduction and are accompanied by significant improvements in coexisting health
problems.
A statistical review of patient charts,
unpublished data on file. 1993.
Study 10
Reference
Davis, L. M., Cheskin L. J. (2006) Dietary
intervention using Medifast meal replacement in pre-bariatric surgery patients: A statistical review of patient charts.
Unpublished
Data on File.
Purpose
To evaluate the efficacy of a dietary intervention
that included a reduced-calorie meal plan utilizing Medifast meal replacements, behavior counseling, and physical activity at achieving
weight loss in low-income pre-bariatric surgery patients.
Methods
14 severely obese patients—13 females
(11 African Americans, 2 Caucasians) and 1 male (Caucasian)—with a mean BMI of 64.14 kg/m2 (range 40.2kg/m2 to 91.7kg/m2)
entered a 6-month weight-control program at the Johns Hopkins Weight Management Center. All patients were Medicaid recipients.
The program provided a comprehensive approach to weight control focused on diet, behavior, and physical activity. Portion-controlled
meal replacements (MRs) supplied by Medifast were utilized as part of the dietary-behavior intervention. All subjects met with
a licensed dietitian and were prescribed a 1,000-1,200 kcal/day diet plan incorporating up to 6 MRs/day. Only 1 subject chose not
to incorporate meal replacements as part of a low-calorie diet plan. The average intake of meal replacements was 2.5-3 per day
through the duration of the study.
Results
After 6 months on the program, patients
lost an average of 26.73 lbs (-2.86kg/m
2
) and 6.96% of their body weight. A high level of satisfaction was reported
with their diet plan. Program completers at 1 month were N=13, at 3 months N=12, and 6 months N=10.
Conclusions
Bariatric surgical candidates who enter
weight control programs to lose weight pre-operatively have been shown to have lower rates of morbidity and mortality. We have
demonstrated that use of meal replacements preoperatively is effective at achieving significant weight loss, and can thus be expected
to improve immediate and longer-term results in bariatric surgery patients.
A statistical review of patient charts,
unpublished data on file. 2006.
Study 11
Reference
Tchernof, A., Starling, R., Turner, A.,
Shuldiner, A. R., Watson, J. D., Silver, K., Poehlman, E. T. (2000). Impaired capacity to lose visceral adipose tissue during weight
reduction in obese postmenopausal women with the Trp64Arg beta3-adrenoceptor gene variant.
Diabetes,
49, 1709-1713.
Purpose
To examine the effect of the Trp64Arg gene
variant on total and visceral adipose tissue loss, and cardiovascular risk factors in response to weight reduction among 24 obese
women (age 57 ± 4 yrs) in a 13 ± 3 mos weight reduction program of 1,200 kcal with or without the inclusion of Medifast.
Methods
Obese, postmenopausal Caucasian women in
the greater Burlington, Vermont area were recruited by local advertisement. A total of 491 obese women were screened, of which
38 were heterozygotes for the Trp64Arg variant (allele frequency 0.10). Of this initial cohort, 24 obese women (1 Arg64Arg homozygote,
10 Trp64Arg heterozygotes, and 13 normal homozygotes) completed the weight loss program.
Inclusion criteria were the cessation of
menstruation for at least 1 year, a BMI >27 kg/m2, and physical inactivity. Women also had to be nonsmokers and non-diabetic.
Other exclusion criteria included atherosclerosis, hypertension (diastolic blood pressure >90 mmHg), orthopedic limitations
or history of fractures, weight loss/gain over the previous 6 months, or thyroid or pituitary disease.
Results
No baseline differences were noted in adiposity
measurements, glucose disposal, and lipid profiles among carriers and non-carriers of the variant allele. Whether women were carriers
or non-carriers of the Trp64Arg allele, significant weight loss (-16.4 ± 5.0kg vs. -14.1 ± 6.2kg, NS) and reductions
in body fat (-10.0 ± 5.2 vs. -11.5 ± 3.9kg, NS) were observed in response to a calorie-restricted program with or
without Medifast.
However, loss of visceral adipose tissue
was 43% lower in carriers of the Trp64Arg allele compared with non-carriers (–46 ± 27 vs. –81 ± 51 cm2,
P = 0.05). Furthermore, there was less improvement in the total cholesterol–to–HDL cholesterol ratio (–0.18 ±
0.54 vs. -0.72 ± 0.56, P = 0.04) in carriers compared with non-carriers of the allele. Although glucose disposal improved
in both groups, there was no difference in the magnitude of improvement between carriers and non-carriers of the variant allele.
Conclusion
Older women carrying the Trp64Arg B3-adrenoceptor
gene variant have an impaired capacity to lose visceral adipose tissue in response to a calorie-restricted diet.
Journal Description:
Diabetes publishes original research about
the physiology and pathophysiology of diabetes mellitus. Submitted manuscripts can report any aspect of laboratory, animal, or
human research. Emphasis is on investigative reports focusing on areas such as the pathogenesis of diabetes and its complications,
normal and pathologic pancreatic islet function and intermediary metabolism, pharmacological mechanisms of drug and hormone action,
and biochemical and molecular aspects of normal and abnormal biological processes.
SCIENTIFIC ADVISORY BOARD
In September 2008, Medifast announced the formation of its Scientific
Advisory Board.
The Scientific Advisory Board consists of a multi-disciplinary
panel that serves as the foundation for scientifically-valid, consumer-centric, high quality innovations for lasting health. The
mission of the board is to help guide Medifast in making informed decisions regarding medical, nutritional, and scientific matters
by providing expertise and information on research and emerging trends.
The work of this cross-disciplinary group builds on Medifast’s
heritage of medically sound approaches to weight loss, and the incorporation of leading-edge clinical research into the Company’s
products and programs.
Medifast Scientific Advisory Board – 2011 - 2012
Lawrence Cheskin, M.D., F.A.C.P.
Associate Professor of Health, Behavior and Society at the Johns
Hopkins Bloomberg School of Public Health
Director, Johns Hopkins Weight Management Center
John E. Hayes, Ph.D.,
Assistant Professor of Food Science, Director, Sensory Evaluation
Center, The Pennsylvania State University
John P. Foreyt, Ph.D.
Professor, Department of Psychiatry and Behavioral Sciences,
Department of Medicine, Baylor College of Medicine
George A. Bray, M.D.
Boyd Professor, Pennington Biomedical Research Center at Louisiana
State University
Slyvia B. Rowe, M.A.
President, S.R. Strategy, LLC
Adjunct Professor, University of Massachusetts Amherst
Adjunct Professor, Tufts Friedman School of Nutrition Science
and Policy
Mark Messina, Ph.D.
Adjunct Associate Professor, Department of Nutrition, School
of Public Health, Loma Linda University
President, Nutrition Matters, Inc.
Param Dedhia, M.D.
Physician
of Integrative Medicine, Canyon Ranch
COMPETITION
There are various weight loss products and programs within the
highly competitive weight-loss industry. These include a wide variety of commercial weight-loss programs, pharmaceutical products,
books, self-help diets, dietary supplements, appetite suppressants, and meal replacements. Medifast’s identified peers and
competitors in the general health and wellness diet industry include NutriSystem Inc., Herbalife Ltd., USANA Health Sciences, and
Weight Watchers International, Inc.
The Company believes its scientific and
clinical heritage and ongoing commitment to evaluating its products and programs through clinical research are primary differentiators
that allow it to compete in this market. In addition to being shown in clinical research, its products and programs have been safely
and effectively used by customers and recommended by physicians for over 31 years. Originally developed by a physician, Medifast
has been on the cutting edge in the development of nutritional and weight-management products since 1980. Medifast Meals are individually
portioned, calorie- and carbohydrate-controlled meal replacements that share a similar nutritional “footprint” and
provide a balance of protein and good carbohydrates, including fiber. Fortified with vitamins and minerals, these specially formulated
products are at the heart of Medifast’s clinically proven program and provide an alternative to fad diets or obesity pharmacotherapy.
The Company’s other
primary differentiator is its unique multi-channel distribution strategy, which provides varying support modalities, and
broadens availability of the Medifast brand by targeting a customer’s individual needs. Medifast medical providers
offer Medifast products and programs to patients in their practice and utilize wholesale sales. Medifast Direct serves
customers through the Medifast website and call center with a free online community, various online support tools, along with
free access to registered dietitians and certified personal trainers. The Take Shape For Life division offers the personal
support of a Health Coach that is often a person who has achieved success on the Medifast Program and has turned their
success into a business opportunity. Medifast Weight Control Centers offer a supervised and structured model for customers
who prefer more accountability and personalized counseling including body analysis and metabolic rate reviews as part of the
ongoing program. The Medifast Program utilizes its meal replacements as part of a structured meal plan which research has shown to
be an effective way to lose and maintain weight loss over time.
PRODUCTS
The Company offers a variety of weight loss and weight management
products under the Medifast® and Essential 1® brands and for select private label customers. The Medifast line includes
more than 75 options, including, but not limited to Medifast Crunch Bars, Medifast Shakes, Medifast Hot Drinks,
Medifast Cold Drinks, Medifast Bites, Medifast Pretzels, Medifast Puffs, Medifast Brownies, Medifast
Soft Bakes, Medifast Cereal Crunch, Medifast Eggs, Medifast Macaroni & Cheese, Medifast Oatmeal, Medifast
Pancakes, Medifast Syrup, Medifast Pudding, Medifast Soft Serve, Medifast Soups, Medifast Homestyle Chili,
Medifast Maintenance Bars, Medifast Soy Crisps, Medifast Crackers, Essential 1 Heart Health Super Omega 3,
and Essential 1 Digestive Health.
Medifast
nutritional products are formulated with high-quality, low-calorie, and low-fat ingredients. Many Medifast products are soy based
and are fully fortified to contain 24 vitamins and minerals, as well as other nutrients essential for good health.
Medifast
brand awareness continues to expand through the Company’s marketing campaigns, improved product quality, and an emphasis
on quality customer service, technical support, and publications developed by the Company’s marketing staff. Medifast products
have been proven to be effective for weight loss and weight management in clinical studies conducted by researchers from leading
universities. The Company has continued to develop its sales and marketing operations with qualified management and innovative
programs. The Company’s facility in Owings Mills, Maryland manufactures all powders and the Company subcontracts the production
of its Ready-To-Drink products, bars, pretzels, puffs, crackers, soy crisps, Lean and Green Meal Helpers, syrup and supplement
products.
NEW PRODUCTS
Medifast expanded its product line in 2012 by introducing several
new and reformulated items including Medifast Cinnamon & Brown Sugar Cereal Crunch, Medifast Mixed Berry Cereal Crunch, Medifast
Macaroni & Cheese, Medifast Lean & Green Meal Helpers, Medifast Chili Nacho Cheese Puffs, Medifast Parmesan Cheese Puffs,
Medifast Ready to Drink Mocha Shake, and the reformulation of the Medifast Shakes. Medifast continues to improve upon and expand
its product line by introducing new, high quality products and by regularly evaluating current products for discontinuation and
reformulation opportunities. Medifast’s products are developed based on customer feedback and market trends.
MARKETING
In 2012, Medifast continued to build and
leverage its core Medifast brand through multiple marketing strategies for each of our distinct distribution channels: Medifast
Direct, Medical Providers, Medifast Weight Control Centers, and Take Shape for Life to their target audiences. Customer acquisition
and retention strategies include national and regional advertising across television, online properties, print publications, direct
mailings, email campaigns, radio, and sponsorships. In addition, the Company executed strategic public relations efforts to secure
local and national editorial placements to raise brand awareness. Medifast has also developed a comprehensive social media strategy
utilizing Facebook, Twitter, YouTube, blogger endorsements, and more. These mediums were used to target new customers by stressing
Medifast's simple, safe, and effective approach to weight loss and management. Many of these programs were also utilized to reactivate,
encourage and support existing customers. Medifast continued to enhance the Medifast websites, including adding features in the
My Medifast community which offers meal planning, community message boards, blogs, and a robust library of information. The Company
also introduced new mobile apps to aid customers in their weight loss and weight management journey.
MANUFACTURING
Jason Pharmaceuticals, Inc., the Company’s
wholly owned manufacturing subsidiary, produces approximately 46% of Medifast products in their manufacturing facility in Owings
Mills, Maryland. The Company purchased the plant in July 2002 for $3.4 million and has recently added production capacity with
additional investments in blending and packaging equipment. The new equipment has significantly improved the Company's production
capability, while also improving overall efficiencies. The remaining 54% of Medifast products are manufactured by third party vendors
in accordance with Medifast proprietary formulas and manufacturing standards. The Owings Mills manufacturing facility is regulated
and inspected by the Food & Drug Administration (the “FDA”) and the Maryland State Department of Health and Mental
Hygiene.
GOVERNMENTAL REGULATION HISTORY
The formulation, processing, packaging,
and labeling of the Company's products are subject to regulation by several federal agencies, but principally by the Food and Drug
Administration. The Company must comply with the standards, labeling and packaging requirements imposed by the FDA for the marketing
and sale of foods and nutritional supplements. Applicable regulations prevent the Company from representing in its literature and
labeling that its products produce or create medicinal effects or possess drug-related characteristics. The FDA could, in certain
circumstances, require the reformulation of certain products to meet new standards, require the recall or discontinuation of certain
products not capable of reformulation, or require additional record keeping, expanded documentation of the properties of certain
products, expanded or different labeling, and scientific substantiation. If the FDA believes the products are unapproved drugs
or food additives, the FDA may initiate similar enforcement proceedings. Any or all such requirements could adversely affect the
Company's operations and its financial condition.
The Federal Trade Commission (“FTC”)
has principal regulatory control over the Company’s advertising. To the extent that sales of foods and nutritional supplements
may constitute improper trade practices or endanger the safety of consumers, the operations of the Company may be subject to the
regulations and enforcement powers of the FTC, and the Consumer Product Safety Commission. In 2012, a subsidiary of the Company
entered into a consent decree with the FTC regarding certain statements in the Company’s advertising for its weight-loss
programs. See Part I, Item 3. Legal Proceedings. The Company's activities are also regulated by various agencies of the states
and localities in which the Company's products are sold.
PRODUCT LIABILITY AND INSURANCE
The Company, like other producers and distributors
of ingested products, faces an inherent risk of exposure to product liability claims in the event that, among other things, the
use of its products results in injury. The Company maintains insurance against product liability claims with respect to the products
it manufactures. With respect to the retail and direct marketing distribution of products produced by others, the Company's principal
form of insurance consists of arrangements with each of its suppliers of those products to name the Company as beneficiary on each
of such vendor's product liability insurance policies. The Company does not buy products from suppliers who do not maintain such
coverage.
EMPLOYEES
As of December 31, 2012, the Company’s subsidiaries employed
947 full-time employees, of whom 327 were engaged in manufacturing, warehouse management, and shipping, and 620 in marketing, administrative,
Medifast Weight Control Centers, call center and corporate support functions. None of the employees are subject to a collective
bargaining agreement with the Company. All employees are employed by either Jason Pharmaceuticals, Inc. or Jason Properties, LLC.
INFORMATION SYSTEMS INFRASTRUCTURE
Our websites are based on commercially developed software and
are hosted at a co-location data center located in Baltimore, Maryland. This data center is SSAE16 and PCI-DSS compliant. This
facility provides redundant network connections, uninterruptible power supplies, robust physical security, fire prevention controls,
and diesel generated power back up for the equipment on which our websites rely. Our servers and our network are monitored 24 hours
a day, seven days a week.
We use a variety of security techniques to protect our confidential
customer data, including regularly scheduled penetration security tests on our websites. We also use an industry leading network
monitoring service for our Intrusion Detection Services (IDS) solution along with Intrusion Prevention System (IPS) devices on
our network’s perimeter. When our customers place an order or access their account information, we use secure channels to
encrypt and transmit information. Our security certificates encrypt all information entered before it is sent to our servers. We
have a secondary firewall layer of security between our customer facing websites and the databases which house their information
and we have deployed mitigation devices to protect against Distributed Denial of Service (DDos) attacks. Customer data is protected
against unauthorized access. We have a redundant network across our organization which provides for inter-connectivity and redundancy
for our corporate locations.
As our operations grow in both size and scope, we will continuously
improve and upgrade our information systems and infrastructure while maintaining their reliability and integrity.
INTELLECTUAL PROPERTY
Products manufactured by and programs marketed
by the Company are sold primarily under its own trademarks and trade names.
Ours policy is to protect our
products and programs through trademark registrations both in the U.S. and in significant international markets. The Company carefully
monitors trademark use and promotes enforcement of its trademarks in a manner that is designed to balance the cost of such protection
against obtaining the greatest value for the Company.
AVAILABLE INFORMATION
Our principal office is located at 11445 Cronhill Drive, Owings
Mills, MD 21117. Our telephone number at this office is (410) 581-8042. Our corporate website is located at
http://www.medifastnow.com
. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed
or furnished pursuant to Section 13(a) and 15(d) of The Securities Exchange Act of 1934, as amended, are also available free of
charge on our website, as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and
Exchange Commission (the “SEC”). The information contained on our corporate website is not a part of this Report.