Natural Products Ingredient Innovator Generating Interest Among Investors Institutions and Industry
ChromaDex (CDXC) emerging as significant player
Dietary supplements are Big Business. In fact, more than 150 million Americans take dietary supplements as part of their ongoing health and wellness efforts. The annual market for dietary supplements is estimated to exceed $30 billion. And investors are warming up to the sector.
According to Nutrition Capital Network (NCN), the health & wellness industry saw investments hit an all-time high in 2012, with 247 transactions recorded in categories ranging from food & beverages to dietary supplements, ingredients, fitness, and enabling technologies.
2012 saw over 50% growth in financings, to 92, indicating a strong interest among venture capital and other funds in fueling growth for the next generation of nutrition and health & wellness companies.
And acquisition activity by large multi-national corporations looking for footholds into the space has been fervent.
Recent deals include:
Pfizer acquiring Alacer Corp., maker and distributor of Emergen-C products for an estimated $350 million
Procter & Gamble buying vitamin maker New Chapter
BASF acquiring fish oil supplier Pronova BioPharma $900 million
UK’s Rickett Benckiser Group snapping up Schiff Nutrition for $1.4 billion, and
Royal DSM acquiring Omega-3 ingredient company Martek BioSciences for $1.1 billion; fish oil supplier Ocean Nutrition for $500 million; and, ingredient company Fortitech for $634 million.
We all remember our parents having us take our “daily vitamin”, but it’s not the run of the mill vitamins that have attracted such attention by consumers. It’s the new cutting edge ingredients that burst onto the supplements scene, and become substantial successes - seemingly overnight... like Omega-3 fatty acids, acai berries, chondroitin and glucosamine, CoQ10, resveratrol, and green tea.
One may argue that it is the ingredient players in the nutritional and supplement space that are the tail wagging the dog.
ChromaDex (OTCQB: CDXC) is just such a company.
Since its founding in 1999, ChromaDex’s business model has slowly evolved into a very unique symbiotic stacking of its two business units, which are:
1.) Its legacy business of providing quality control (QC) and research services in the natural products industry as well as maintaining a vast catalogue of phytochemicals (chemical compounds that are isolated from plants or botanicals) for food and beverage, cosmetics, nutritional supplement and pharmaceutical companies; and,
2.) its nutritional ingredient discovery and commercialization business that discovers, acquires, clinically studies, develops and commercializes proprietary ingredient technologies
To fully appreciate ChromaDex, we need to explain exactly how its business model has evolved.
ChromaDex’ legacy business maintains and serves a customer list of who’s who in the natural products enterprise and research communities. Customers include Pepsico (NYSE: PEP), Nestle, Kraft (NASDAQ: KRFT), Herbalife (NYSE: HLF), Cargill, Pfizer (NYSE: PFE), Estee Lauder (NYSE: EL), the USDA, the FDA and dozens of highly esteemed universities and colleges like Dartmouth, Cornell and Ole Miss.
These enterprises and research centers contract with ChromaDex to provide analytical services and/or to acquire compounds from ChromaDex’ catalogue of phytochemicals – sometimes in meaningful quantities, which catches the eye of ChromaDex management.
This service relationship gives ChromaDex very unique intelligence about what key researchers or industry players may be up to.
With such intelligence in hand, ChromaDex’s management is in an extraordinary and unique position to approach researchers and patent holders and acquire rights to novel compounds that it believes may have substantial market potential. Hence, the legacy service business provides a built-in avenue to an ever growing pipeline of newly discovered ingredients.
Once ChromaDex acquires patent and IP rights to these new ingredients, it develops a process to produce the ingredient in commercial scale; brands the ingredient concurrent with initial product launch; performs clinical studies to verify efficacy; and, finally begins monetization of the ingredient which can be in the forms of distribution, licensing, or partnering agreements.
This unique platform of market intelligence in the natural products space has evolved into the ideal model to discover and license novel, early-stage ingredient technologies and associated intellectual property, making ChromaDex (OTCQB: CDXC) a go-to provider for large vitamin, food and beverage, pharmaceutical and cosmetic product companies that do not maintain dedicated R & D resources.
ChromaDex’s current portfolio of novel patented, or patent pending ingredients include:
pTeroPure™ pterostilbene - Named North America’s Most Promising Ingredient of the Year in 2010 by Frost & Sullivan. ChromaDex acquired the exclusive worldwide patent rights on pTeroPure™ from the USDA and the University of Mississippi. The blueberry-based ingredient which has been clinically proven to reduce blood pressure is gaining considerable market acceptance and recently garnered the attention of media outlets including, The Dr. Oz Show and CTV, Canada’s national TV network. pTeroPure is the active ingredient in the BluScience line of products which can be found in more than 10,000 retail locations.
Nicotinammide Riboside (“NR”) - Sometimes referred to as the "Miracle Molecule" or "Hidden Vitamin," NR is found naturally in trace amounts in milk and other foods and is a more potent version of Niacin (vitamin B3). The beneficial effects of NR in humans include increased fatty acid oxidation, mitochondrial activity, resistance to negative consequences of high-fat diets, protection against oxidative stress, prevention of peripheral neuropathy and blocking muscle degeneration. Findings from a recent study by Weill Cornell Medical College and the Ecole Polytechnique Federale de Lausanne, Switzerland researchers showed mice on a high-fat diet that were fed NR gained 60 percent less weight than mice eating the same high-fat diet without NR. Moreover, unlike the mice that were not fed NR, none of the NR-treated mice had indications that they were developing diabetes and they had improved energy and lower cholesterol levels, all without side effects. The Swiss researchers were quoted as saying the effects of NR on metabolism "are nothing short of astonishing."
PURENERGY™ - a patented co-crystal ingredient comprised of caffeine and ChromaDex's pTeroPure™ pterostilbene that forms a unique crystalline structure having superior benefits as compared to the two individual components alone. ChromaDex recently began its first human clinical (PK) study which is intended to confirm an earlier animal study which showed PURENERGY had a 6-8 times longer half-life as compared to caffeine alone. The results of the animal study suggest that PURENERGY may provide longer sustained energy and alertness with reduced amounts of caffeine and without the "crash" typically experienced when ingesting caffeinated energy products.
The ChromaDex story may resonate well with those familiar with Martek and its omega-3 and omega-6 additives for infant formula. Martek was ultimately sold to DSM for about $1.1 billion. But there are key differences between the two companies worth noting as well. In particular, whereas Martek was essentially a single product company, ChromaDex (OTCQB: CDXC) offers a multi-product portfolio and pipeline, and diversification that gives management multiple shots at the goal to have one, or more, of its ingredients become a blockbuster.
Lastly, it is important to note that Miami billionaire pharmaceutical entrepreneur Dr. Phillip Frost is the single largest shareholder of ChromaDex. According to the most recent ChromaDex investor deck, Dr. Frost owned approximately 15.2 million shares, or 16.5% percent of ChromaDex. Dr. Frost was chairman and CEO of IVAX Corp. which was sold in 2007 to Israeli giant Teva Pharmaceuticals (NYSE: TEVA) for $7.4 billion where Dr. Frost currently serves as Chairman of the Board. He is also currently the CEO and Chairman of Opko Health (NYSE: OPK).
Investors can learn more at
http://investors.chromadex.com/phoenix.zhtml?c=212121&p=irol-irhome
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About ChromaDex (OTCQB: CDXC)
ChromaDex® is an innovative natural products company that discovers, acquires, develops and commercializes proprietary-based ingredient technologies through its unique business model which utilizes its wholly-owned synergistic business units, including ingredient technologies, natural product fine chemicals (known as "phytochemicals"), chemistry and analytical testing services, and product regulatory and safety consulting (as Spherix Consulting). The Company provides seamless science-based solutions to the dietary supplement, food & beverage, animal health, cosmetic and pharmaceutical industries. To learn more about ChromaDex please visit http://www.chromadex.com.
About Emerging Growth LLC
EGC is a marketing and consulting firm that specializes in creating ongoing communications strategies for public and private companies.
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