ITEM 1.
BUSINESS
SUMMARY
Medifast, Inc. (the “Company” or “Medifast”) is a Delaware corporation, incorporated in 1993.
Our fiscal year ends December 31 and all references to this year refer to the fiscal year ended December 31, 2013.
The Company’s operations are primarily conducted through seven of its wholly owned subsidiaries, Jason Pharmaceuticals, Inc., Take Shape For Life, Inc., Jason Enterprises, Inc., Medifast Franchise Systems (“MFSI”), Inc., Jason Properties, LLC, Medifast Nutrition, Inc. 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, Food and Drug Administration (“FDA”)-approved manufacturing facility located in Owings Mills, Maryland.
MARKETS
Over the past 30 years, obesity in the United States has risen dramatically.
The American Medical Association officially declared obesity a disease in June 2013.
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 adult 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/m2 or greater, whereas overweight is defined as a BMI ranging between 25 and 29.9 kg/m2.
According to the CDC in 2012, all states in the U.S. had a prevalence of obesity of at least 20%.
Furthermore, the CDC reported that forty-one states had adult obesity rates of 25% or higher, and thirteen of these states had obesity rates that exceeded 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 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 prevalence” 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 per year 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 a 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.
Take Shape For Life
Take Shape For Life is the personal coaching division of Medifast.
This physician led coaching network consists of independent contractor Health Coaches (“Health Coaches”), who are trained to provide coaching and support to clients on Medifast weight-loss products and programs. The role of the Health Coach is to give clients the encouragement and mentoring to assist them to successfully reach a healthy weight and adopt a healthy lifestyle.
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 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 below under “Clinical Research Overview.”
Health Coaches and their clients follow the principles of the
Discover Your Optimal Health
book,
Habits of Health
book, and
Habits of Health
companion workbook written by the NY Times Best-Selling author and Take Shape For Life co-founder and medical director 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 new Health Coaches started as weight-loss clients of a Health Coach, had success on the Medifast program, and became a Health Coach to help others through the weight-loss process.
Approximately 15% 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 under the Integrated Compensation Plan in two ways:
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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.
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Bonuses:
Health Coaches are offered several bonus opportunities, including client support bonuses, certification bonuses, team growth bonuses, generation bonuses, elite leadership bonuses, consistency bonuses, client acquisition bonuses, and 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.
Health Coaches are encouraged to reach full integration at their appropriate business level (Health Coach, Business Coach, Business Leader). An Integrated Health Coach is rewarded for their higher level of performance by receiving higher earning potential for the bonuses outlined below. The Company pays bonuses on a monthly basis to qualified Health Coaches.
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Client Support bonuses are paid to Health Coaches who have at least 1,200 in frontline product sales to either clients or personally sponsored Health Coaches. These are incremental bonuses based on the Health Coach frontline product sales performance.
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Certification bonus are paid to Health Coaches who have purchased the COPE online certification course, completed the course work and passed a final examination. This bonus is earned on all frontline product sales starting in the month certification status is obtained.
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Team growth bonuses are paid to Health Coaches who have at least five ordering clients per month and who have generated over $1,200 in group product sales per month.
Monthly growth bonuses are incremental bonuses that enable Health Coaches to earn income on product orders placed by clients and/or Health Coach teams within their network.
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Generation bonuses are paid to Health Coaches who qualify as an “Executive Director” and 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 has obtained five Qualifying Points. “Qualifying Points” are points earned for every $1,200 in frontline product sales generated or every qualified Senior Coach team.
A “Senior Coach” is a Health Coach who generates at least $1,200 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.
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Elite leadership bonuses are paid to Health Coaches who qualify as an Executive Director and have three or more Health Coaches in their business who have achieved the rank of Executive Director.
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Consistency bonuses are paid to Health Coaches who are certified and maintain frontline product sales and/or qualified Senior Coach team performance 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 Health Coach consistency bonus. Certified Health Coaches who maintain at least $6,000 in frontline product sales, at least $15,000 in group product sales, and qualify five Senior Coach teams for three consecutive months are paid a Fully Integrated Business Coach Consistency Bonus.
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The 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.
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The assist bonuses are paid to Health Coaches who assist a newly sponsored Health Coach attain the Client acquisition bonus.
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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.
The Integrated Compensation Plan went into effect in September of this year. Prior to September the compensation plan utilized was similar and is outlined below:
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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The assist bonuses are paid to Health Coaches who assist a newly sponsored Health Coach attain the Client acquisition bonus.
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The implementation of the Compensation Plan move from the original plan mentioned above and the Integrated Compensation Plan required a transition period. This transition period occurred from September 1, 2013 through December 31, 2013 and as of January 1, 2014 the Integrated Compensation Plan was in full effect for all Health Coaches.
The Company implemented the Integrated Compensation Plan in order to:
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Align our compensation plan with our evolving business
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Incorporate the concepts of full integration and reward Health Coaches for becoming certified
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Offer more rewards to those Health Coaches who support clients as well as build Health Coach teams
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Ensure that the compensation plan is efficient and rewards Health Coaches appropriately.
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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 notes to 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
Medifast Weight Control Centers is the brick and mortar clinic channel of Medifast with affiliate-owned locations in Pennsylvania, New Jersey, Delaware, Texas, Florida, Maryland, North Carolina and Virginia.
Jason Properties, LLC, a subsidiary of Medifast, Inc., had a total of 75 Medifast Weight Control Centers in operation at year-end. Medifast Weight Control Centers offer a high-touch model including comprehensive Medifast programs for weight loss and maintenance, customized client counseling, an InBody
TM
body composition analysis, and monitoring with a BodyGem
TM
indirect calorimeter that determines resting metabolic rates. Medifast Weight Control Centers conduct local advertising including radio, print, television and web initiatives.
The Centers also benefit from the enterprise brand advertising which encourages walk-ins and referrals from their customers and other Medifast business channels.
In 2008, MFSI, a subsidiary of Medifast, began offering the Center model as a franchise opportunity.
MFSI currently has franchised centers located in Alabama, Arizona, California, Louisiana, Minnesota, Wisconsin, Maryland and Pennsylvania.
As of December 31, 2013 41 franchise locations were in operation.
MFSI currently offers the Medifast Weight Control Center franchise opportunity in all states under a registered (where required) franchise disclosure document (“FDD”).
The MFSI Franchise Agreement requires franchisees to develop a minimum of three Medifast Weight Control Centers within a defined geographic area in the time frame set forth in the Development Agreement between MFSI and the franchisee.
MFSI’s 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 execution of the Franchise Agreement and Development Agreement, franchisees are required to promptly select sites for the Centers, each of which are subject to MFSI’s approval.
A franchisee’s initial fee includes the franchise fee for the first Center to be developed and a non-refundable deposit for the second and third Centers to be developed, and covers the cost of MFSI resources provided for, among other things, the training of franchisees and their staff, and approval of the proposed territory for development.
If a franchisee desires to open more than three centers in the designated territory, there is an additional fee charged for each additional Center to be developed.
Prior to the opening of each Medifast Weight Control Center franchise established under the Franchise and Development Agreements, MFSI will do the following:
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designate the Center’s protected territory.
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review for approval the sites selected by the franchisee for the Center.
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review for approval the lease governing the location where the Center is to be located.
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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.
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provide an initial training program.
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provide the franchisee on-site assistance and guidance for approximately three to five days on or about the opening of the Center.
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provide the franchisee with online access to a password-protected, electronic version of the Medifast Weight Control Centers® Franchise Operations Manuals.
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MFSI may, in certain limited circumstances, cause its affiliate to provide products at a discounted price.
Medifast may, in certain circumstances guarantee a franchisee’s notes, leases or other obligations. MFSI does not offer direct or indirect financing.
While MFSI does not currently have a purchase option included in its Franchise Agreement, it does have the right of first refusal to acquire a Center if the franchisee wishes to sell a Center.
Medifast Wholesale
Since 1980, over 20,000 doctors have recommended Medifast products and programs to their patients as a medically-proven solution to control their weight and improve their health. Medifast provider practices carry an inventory of wholesale products and resell them to patients while providing appropriate medical monitoring, testing, and support to ensure healthy weight loss.
The Company offers extensive resources to assist the providers, their staff and their patients in achieving success with their program. Medifast Medical Providers have access to marketing assets and training modules to help the practice grow their program and enable patients to achieve their weight loss and associated health goals. Medifast’s nutrition support team includes registered dietitians and a behavioral specialist who provide program support and advice via phone and email.
In 2012, the Company entered into a 3-year strategic partnership with Productos Medix S.A. de C.V. (“Medix”), a leader in pharmaceutical obesity products in Mexico.
The agreement granted Medix an exclusive license for the distribution of Medifast products and programs through physicians and weight control centers in Mexico under the Medifast brand.
Inventory is shipped to Medix within the United States and the resulting revenues are classified as domestic sales for the Company.
In January 2013, the Company and Medix, amended their contract to provide an exclusive 5-year licensing agreement 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.
On September 19, 2013, Medix held the grand opening of the first international Medifast Weight Control Center in Mexico City.
Medix now has three weight control centers open in Mexico with plans to expand.
In December 2013, Medix opened the first Medifast Weight Control Center in Bogota, Colombia. The Company expects this relationship to continue to grow throughout 2014 with the focus on opening centers in additional countries and further penetration in established regions.
The Company also expanded its international presence into Canada in March 2014, opening new channels of distribution. Our current sales are through the Medifast Direct and Medical Provider channels, with the long-term goal of expanding other Medifast channels into Canada.
SEASONALITY
The Company's weight management products and programs have historically been subject to seasonality.
Traditionally the holiday season impacts the fourth quarter with fewer sales of diet control products and services.
January and February generally show increases in sales, as these months are considered the commencement of the “diet season.”
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 3, were not disclosed to Medifast.
Each reviewer is independent and has no association with Medifast or its affiliates.
The first three studies cited below evaluated the effectiveness of the Medifast 5 & 1
®
Plan which consists of five Medifast meal replacement products and one self-selected Lean & Green meal daily. The 5 & 1 Plan is the plan most frequently used by Medifast customers within all business channels.
Two of these clinical studies used the gold standard study design a, randomized, controlled trial, and the third study was a large retrospective chart review conducted in Medifast Weight Control Centers.
All three studies demonstrated statistically and clinically significant weight loss accompanied by improvements in body composition and other health related parameters in participants using the 5 & 1 Plan.
Sample sizes for the studies described below ranged from 14 to over 1,000 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.
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 9 and 10, 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
Shikany, J.M., Thomas,
A.S., Beasley, T.M., Lewis C.E., and Allison, D.B. (2013) Randomized controlled trial of the Medifast 5 & 1 Plan for weight loss.
International Journal of Obesity (lond)
37
(12):1571-1578.
(First published online 9 April 2013; doi:10.1038/ijo.2013.43.)
Purpose
The Medifast 5 & 1 Plan (MD) is a portion-controlled, nutritionally-balanced, low-fat weight-loss plan. We studied the effects of MD compared with a reduced-energy, food-based diet (FB) on body weight, waist
circumference, fat mass and other measures in adults.
Method
The study was a two-parallel-arm, randomized, controlled trial comparing MD to FB over 52 weeks. A total of 120 men and women aged 1965 years with BMI
>
35 and
<
50 kg/m
2
were randomized to MD (n=60) or FB (n=60). Follow-up included a 26-week weight-loss phase and 26-week weight-maintenance phase. Anthropometric, body composition, biochemical and appetite/satiety measures were performed at baseline and at 26 and 52 weeks. An intention-to-treat, linear mixed models analysis was the primary analysis.
Results
Fifty MD subjects (83.3%) and 45 FB subjects (75.0%) completed the study on assigned treatment. At 26 weeks, race-adjusted mean weight loss was 7.5 kg in MD subjects vs 3.8 kg in FB subjects (P¼0.0002 for difference); reduction in waist circumference was 5.7 cm in MD vs 3.7 cm in FB (P=0.0064); and fat mass loss was 6.4 kg in MD vs 3.7 kg in FB (P=0.0011). At 52 weeks, the corresponding reductions were 4.7 vs 1.9 kg (P=0.0004); 5.0 vs 3.6 cm (P=0.0082); and 4.1 vs 1.9 kg (P=0.0019) in MD and FB subjects, respectively.
Conclusion
In obese adults, MD resulted in significantly greater reductions in body weight and fat compared with an FB diet for 1 year after randomization.
The
International Journal of Obesity
provides an international, multi-disciplinary forum for the study of obesity. The journal publishes basic, clinical and applied studies and also features a quarterly pediatric highlight.
Study 2
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
, 3(10): 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 meal replacement plan 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 Medifast 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 meal replacements 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 3
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 CPR 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.
Study 4
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 Medifast 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 5
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 (MMRS) 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 6
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 Medifast 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 7
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 8
Reference
Matalon, V. (2000) An evaluation of weight loss following a carbohydrate and fat restricted diet with appetite suppressant and dietary supplementation.
The Bariatrician,
Summer 2000
, pp.
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 were 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 reductions 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:
The Bariatrician is a scientific publication distributed twice a year to
American Society of Bariatric Physicians
(ASBP) members and subscribers.
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 9
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
u
IU/ml; p=0.022), and calculated free androgen index (-3.7 ± 2.54; p=0.017). 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.
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. Its mission 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.
The Scientific Advisory Board is chaired by Lawrence Cheskin, M.D., F.A.C.P., associate professor of Health, Behavior, and Society at Johns Hopkins Bloomberg School of Public Health and director at Johns Hopkins Weight Management Center.
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 since 1980.
Originally developed by a physician, Medifast has been on the cutting edge in the development of nutritional and weight-management products since the Company was founded.
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.
Another primary differentiator is the Company’s unique multi-channel distribution strategy, which provides varying support modalities, and broadens the 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 a 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. Medifast programs utilize meal replacements as part of a structured meal plan the 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 bars, bites, pretzels, puffs, cereal crunch, drinks, eggs, hearty choices, oatmeal, pancakes, pudding, soft serve, shakes, smoothies, soft bakes, and soups.
Medifast nutritional products are formulated with high-quality, low-calorie, and low-fat ingredients.
Medifast meal replacements are 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 powder based products and the Company subcontracts the production of all other products.
NEW PRODUCTS
Medifast expanded its product line in 2013 by introducing several new items including Medifast Tomato Basil Bisque, Medifast Pineapple Mango Smoothie, Medifast Triple Berry Smoothie, Medifast Cookie Dough Chewy Bar, Medifast Peanut Butter Chocolate Chip Chewy Bar, Medifast Blueberry Muffin Soft Bake, and Medifast Ziti Marinara.
Medifast identifies opportunities to expand its product line by regularly surveying its customer base and studying industry and consumer trends. This allows Medifast to introduce new, high quality products that meet consumer demand.
MARKETING
In 2013, Medifast continued to build and leverage its core Medifast brand through multiple marketing strategies for each of our distinct distribution channels: Medifast Direct, Medical Wholesale, 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.
MANUFACTURING
Jason Pharmaceuticals, Inc., the Company’s wholly owned manufacturing subsidiary, produces approximately 44% 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 raw materials utilized in the manufacturing of the Company’s products are sourced from multiple supplies within the United States.
The remaining 56% 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 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 FDA.
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 Note 9, “Contingencies”.
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, 2013, the Company’s subsidiaries employed 808 full-time employees, of whom 281 were engaged in manufacturing, warehouse management, and shipping, and 527 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 solution along with Intrusion Prevention System 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 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, Maryland
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 Exchange Act are also available free of charge on our website, as soon as reasonably practicable after such material is filed with, or furnished to, the SEC.
The information contained on our corporate website is not a part of this Report.