Stanford University has sent a “cease and desist” letter to Nu Skin Enterprises Inc asking the company to stop using a university researcher’s name in its advertising, adding new scrutiny to the skin product maker’s business claims and practices.
According to a copy of the letter e-mailed to Reuters, Stanford geneticist Stuart Kim is listed as a “Nu Skin Partner” in developing its ageLOC anti-aging products, though he has nothing to do with the company.
Nu Skin touts its skin creams and pills as using innovative technology to “reset” genes that promote a more youthful look and feel for its clients, according to its Web site.
“Neither Dr. Kim nor Stanford is a ‘Nu Skin Partner’ and neither has anything to do with the company,” states the letter, signed by Steven Rosen from Stanford’s Office of the General Counsel.
Stanford asked Nu Skin to remove all references to Kim from its Web site by yesterday. Kim told Reuters he had previously collaborated with Nu Skin, but stopped the relationship last year and that he had never received any money from the company.
The news comes hours after short seller Andrew Left’s Citron Research issued a new report critical of Nu Skin, saying the firm had misrepresented its relationship with Kim and had never funded any of his research. Citron also says the company’s products could come under greater US regulatory scrutiny.
Citron repeated its allegation that Nu Skin operated an illegal multilevel marketing scheme in China, the fastest growing market in direct selling. It first aired this accusation last week, hurting Nu Skin shares.
Nu Skin has rejected the accusation. Chief financial officer Ritch Wood said on Wednesday that Nu Skin’s sales model complied with Chinese regulations.
China’s commerce ministry did not respond immediately yesterday to requests for comment on Nu Skin’s sales model.
Direct selling has a turbulent history in China. Beijing cracked down on illegal pyramid-type marketing schemes in the late 1990s, after some of them collapsed and led to riots by angry consumers who had not received their purchased goods. China banned direct-selling firms in 1998, including US-based group Amway, though it lifted the restriction seven years later.
Shares of Nu Skin closed down 4 percent on Thursday at US$40.82 on the New York Stock Exchange, as investors questioned whether it had been misrepresenting the science behind its anti-aging skin products that make up 40 percent of sales.
A Stanford spokesman said the university’s dermatology department has a separate, long-standing relationship with Nu Skin, including a clinical trial in progress.
Nu Skin said its relationship with Stanford began in 1999. In 2009, it gave US$1.5 million to a study on human skin aging with Kim and other scientists. Kim later left the study, but two dermatologists, Anne Chang and Alfred Lane, continue to work on the study, Nu Skin said.
“During the past 13 years, Nu Skin has funded multiple research studies at Stanford, which have resulted in papers published around the world,” a company spokesperson said.
Wood on Thursday told analysts at a conference in Boston that the company expected sales of the ageLOC family of products to reach US$800 million, or roughly 40 percent of what Wall Street analysts thought the company would take in this year, according to a webcast of the meeting.