On June 2, 2017, Pomerantz LLP was appointed Co-Lead Counsel in a class action lawsuit against USANA Health Sciences, Inc. (“USANA” or the “Company”) and certain of its officers. The class action, filed in United States District Court, District of Utah, is on behalf of a class consisting of investors who purchased or otherwise acquired USANA securities, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934.
USANA Health Sciences, Inc. develops, manufactures, and sells science-based nutritional and personal care products primarily to reduce the risk of chronic degenerative disease.
On August 16, 2010, USANA announced that it had acquired BabyCare Ltd. (“BabyCare”), a China-based manufacturing company that develops and sells nutritional products primarily for infants. Over the next six years, USANA steadily expanded BabyCare’s market presence in China. In February 2013, the Company announced that it had received official government approval from the Ministry of Commerce People’s Republic of China (“MOFCOM”) for direct selling activities in the provinces of Jiangsu and Shaanxi, and the municipality of Tianjin. In May 2016, USANA announced MOFCOM approval for direct selling activities in the provinces of Liaoning, Shandong, Shanxi, Sichuan, and Guangdong, as well as the municipalities of Dalian, Qingdao, and Shenzhen.
The complaint alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company’s BabyCare subsidiary had engaged in improper reimbursement practices in China; (ii) these practices constituted violations of the Foreign Corrupt Practices Act (“FCPA”); (iii) as such, the Company’s China revenues were in part the product of unlawful conduct and unlikely to be sustainable; (iv) the foregoing conduct, when it became known, was likely to subject the Company to significant regulatory scrutiny; and (v) as a result of the foregoing, USANA’s public statements were materially false and misleading at all relevant times.
On February 7, 2017, post-market, USANA disclosed that “[t]he Company is voluntarily conducting an internal investigation of its China operations, BabyCare Ltd. . . . focus[ing] on the compliance with the Foreign Corrupt Practices Act . . . and certain conduct and policies at BabyCare, including BabyCare’s expense reimbursement policies.” USANA advised investors that the Company had retained outside counsel to conduct the investigation and had notified both the SEC and the U.S. Department of Justice of the investigation.
On this news, USANA’s share price fell $7.25, or 11.57%, to close at $55.40 on February 8, 2017.