GNC Shares Rise On Settlement Of DoJ Illegal Supplements Investigation

Settlement

According to Reuters, GNC agreed to pay the U.S. Department of Justice (DoJ) $2.25 million and make changes to its practices to avoid federal prosecution over its alleged sale of the illegal dietary supplements.

The allegations date back to 2013 when the company sold a misbranded supplement called OxyElite Pro Advanced Formula. The product was made by USP Labs who was indicted in November of 2015 and is accused of importing ingredients from China using false certificates of analysis and false labeling.

"According to an agreed-upon statement of facts that accompanies the non-prosecution agreement, GNC engaged in acts and omissions that allowed a misbranded supplement — OxyElite Pro Advanced Formula, a product of Dallas-based USPlabs LLC — to be sold at GNC locations nationwide in 2013," the DoJ said in a press release distributed to media sources and obtained by Benzinga. "The statement of facts notes that GNC sold the product based on representations from UPS Labs that ingredients contained in the product complied with the law. It further notes that GNC did not undertake additional testing or require additional certifications to confirm such representations or to verify that the ingredients in the product were as represented."

Stock Performance

GNC's stock hit an intra-day high of $14.64 following the DoJ's announcement after the stock was trading in negative territory for most of the day. However, the stock quickly erased all of its gains and was last seen trading at $14.08, down 0.85 percent on the day.

The stock is also trading well off its highs of above $20 per share in October when the stock rallied following rumors the company was being targeted for an acquisition by a Chinese buyer.