Submitted by Christopher French as part of our contributors program.
America’s obesity epidemic could be good long-term news for the stock of a company called ChromaDex (CDXC). The Irvine, California based supplement company just signed an agreement to develop a supplement that could prevent obesity. It could even prevent obesity in people that eat a lousy diet composed of fatty foods, in other words, average Americans.
The supplement is called nicotinamide riboside (NR), and it’s a kind of Vitamin B-3 made from milk. Research at the Weil Cornell Medical College and the Federal Polytechnic School in Lausanne, Switzerland indicated that mice that were fed a fatty diet and NR didn’t get fat. If that wasn’t enough, the mice had more energy, more muscles, and less chance of getting diabetes. The exciting thing about this development is that it is based on real research done by real scientists in a real laboratory. The results were actually published in a real scientific journal called Cell Metabolism.
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Weill Cornell, which is associated with the respected New York Presbyterian Hospital and one of America’s top institutions of higher learning, Cornell University in New York City, is one of the top medical schools and research centers in the United States. The Federal Polytechnic School, or Ecole Polytechnique Federale de Lausanne, is a top ranked research and teaching institution in Switzerland, so NR is based on research at two of the world’s top research universities.
“This study is very important,” Dr. Anthony Sauve, an assistant professor of pharmacology, is quoted as saying in a Weill Cornell press release. “It shows that in animals, the use of NR offers the health benefits of a low-calorie diet and exercise-without doing either one.”
It is obvious that a respected scientist such as Dr. Sauve would not make such a statement unless he was sure of what he was saying. There is obviously something to this research, although it should be noted that it has not been tested in humans, so there’s no guarantee that NR will work for people.
Major Medical Research School Licenses Fat Fighting Supplement Process
Now Cornell University has granted ChromaDex a license for a process to manufacture a supplement made from nicotinamide riboside. Obviously, this supplement could become a huge money maker for Chroma Dex if it works as advertised and is approved for sale to the public.
If ChromaDex is actually able to develop an effective diet pill based on this research, it could have a tremendous new source of revenue. Obese Americans are now spending incredible amounts of money on diet pills. The pharmaceutical industry is already reaping the rewards from overweight Americans.
Arena Pharmaceuticals (ARNA) saw its shares rise in value by 12% on Tuesday, June 19, on rumors that the U.S. Food and Drug Administration (FDA) might approve its new diet drug lorcaserin. If it were approved, lorcasserin would be the first new diet drug approved in a decade. Another pharmaceutical house, Vivus (VVUS), saw its shares rise by 3% on Monday, June 18, because of rumors that the FDA was reconsidering its diet drug Qnexa.
Anybody who looks around on the streets these days knows that there is a huge potential market for any sort of obesity product. Around one third of American adults, or 78 million people, are now obese. Some experts think that as many as 500 million people around the world are obese. These numbers are sure to increase as cheap food and sedentary lifestyles spread across the globe.
Basic human nature dictates that many of these people will quickly reach for any alternative to eating vegetables and hitting the gym. They will also be willing to pay for an alternative to self sacrifice. NR obviously offers such an alternative.
Savvy investors understand these basic facts and are prepared to capitalize upon them. One such individual is Barry Honig, who formerly served as a co-chairman and director at interCLICK (ICLK). Honig has purchased around seven million shares of ChromaDex’s common stock in recent months. Mr. Honig also serves as a co-chairman and director at ChromaDex. It should be noted that Mr. Honig, as a director and investor in ChromaDex, is in a position to profit from any increases in its stock value.
His expertise is in helping launch new companies, but he also has a reputation as a stock picker. In 2011, Mr. Honig purchased 248,771 shares of Broadvision (BVSN) at $8.50 apiece. Within six months, the share price had risen to $56.
So, it’s obvious that a very successful investor with a proven track record thinks that this stock could take off in the near future. Honig has been right about other companies he was involved in interCLICK was sold to Yahoo! (YHOO) for $270 million in 2011.
So, what does Mr. Honig see in ChromaDex besides its ownership of a potentially valuable intellectual property? The company has a proven track record of bringing new products to market. It has a catalog of 3,470 products and proven customer base. The customer base includes Fortune 500 companies. It also has an experienced management team, led by Co-Founder and CEO Frank L. Jaksch Jr., who holds a bachelor’s degree in chemistry. His expertise is in analytical chemistry, product development, and understanding legal regulatory processes.
The company’s Consulting Chief Scientific Officer, Jim McChesney PhD, has been working in the natural products industry for 45 years. McChesney formerly served as F.A.P. Barnard Distinguished Professor Pharmaceutical Sciences at the University of Mississippi. He later worked as Vice President of Research at NaPro Biotherapuetics Inc. and Chief Scientific Officer at Tapestry Pharmaceuticals. At Tapestry, McChesney designed a supplement that is undergoing Phase II clinical trials.
ChromaDex’s Vice President of Marketing Ann, Deren-Lewis, has had 20 years of experience in the pharmaceutical field. She has worked at GlaxoSmithKline (GSK), Merz Pharmaceuticals, Amgen (AMGN), Genentech, and OrthoNuerogena. That means she understands how the industry works and how to get NR into doctor’s offices and medical facilities.
ChromaDex also has a successful track record of bringing a product similar technology to market. In July 2008, it entered into an agreement with the Research Foundation of the State University of New York to commercialize AnthoPure, which isolates potentially beneficial antioxidant compounds in fruits. AnthoPure, which was developed at the State University of New York at Buffalo, allows for the production of a commercial supplement made from such compounds.
A Huge Potential Market
ChromaDex would seem to have the technical and marketing expertise necessary to develop a product such as nicotinamide riboside and bring it to market. The market for such a supplement could be huge because half of all Americans already admit to taking a dietary supplement.
The dietary supplement industry is certainly profitable; in 2010, Americans purchased $28 billion worth of natural supplements from dedicated retail stores, according to the Natural Products Association trade group. This figure probably underestimates actual sales because it doesn’t include the vast online market for such products or the increasing numbers of products sold through major retailers, such as Target and Wal-Mart. The association also reported that supplement sales grew by 4.4% in 2010.
ChromaDex seems to be an excellent position to market a supplement that could be one of the best sellers yet. With a rising rate of obesity and few new diet drugs on the market, NR should be a huge seller. If it succeeds, this supplement could greatly increase the sales and stock values of this little supplement company.
It should be noted here that ChromaDex is taking a huge risk on NR. There is no guarantee that it could develop a marketable product from this nutrient. It could also take years to develop such a product and win approval for it, so there it could be years before ChromaDex receives any additional revenue from its deal with Weill Cornell.
Yet it appears that this little supplement company could be in a position to make a lot of money out of America’s bulging tummies and its aversion to exercise. It goes without saying that that could make ChromaDex an attractive takeover target, which could mean even more profits for stockholders.