Submitted by Sarah Harris as part of our contributors program.
Investors looking for a small company in the early stages of launching a promising product should pay close attention to ChromaDex (CDXC), a natural products and nutraceutical certification company founded in 1999. Chromadex is already harvesting accolades and revenue from its patented and clinically studied blueberry-based supplement pTeroPure (pterostilbene), while its established analytical services unit enables the company to foresee natural-product trends before they emerge in the marketplace.
Its bio- and nature-identical blueberry molecule – branded as pTeroPure – has the potential to grow most vigorously and turn the company into a major player in the supplements market.
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The reason? pTeroPure is linked to blood-pressure reduction, cognitive support, and cancer prevention, all major ailments that could strike everyone and currently have limited cure. And it is also because the pTeroPure story indicates some important similarities with the business model used by Martek, the company behind the fish oil boom.
Acquired by Royal DSM DV for $1.1 billion in 2010, Martek put omega-3 fatty acids (DHA and EPA) on the map with a long-term, multi-million dollar marketing campaign aimed initially at infant-formula producers. Having invested in clinical studies to confirm the health benefits of omega-3s (which the body does not produce naturally), Martek single-handedly brought into common, consumer usage the terminology “fish oil” – the most concentrated source of omega-3s.
Studies by Martek and others led the American Heart Association (AHA) to issue an omega-3 recommendation for people with certain heart problems, which was practically a “blue ribbon” for fish oil supplements.
In a development reminiscent of that victory, the AHA, in August of 2012, accepted for presentation at its 2012 High Blood Pressure Research Sessions a paper on the results of a clinical study on ChromaDex’s pTeroPure performed by the University of Mississippi.
While the invitation is an important milestone in the pTeroPure story, just a year before ChromaDex presented its study findings, pTeroPure won the North American Frost & Sullivan Award for Most Promising Health Ingredient of 2010. Announced on May 3, 2011, the Frost & Sullivan award notes that the active ingredient in pTeroPure – pterostilbene – has biological activity similar to that of resveratrol.
Resveratrol is the red-wine ingredient widely believed to cause the “French paradox” – or the French ability to eat incredibly rich foods without developing lethal heart disease at young ages. Does that mean that pTeroPure may be known, someday, as the “blueberry miracle”?
Here are some of the other reasons for investors to consider looking at ChromaDex (CDXC).
• For the three months ended September 29, 2012, ChromaDex reached record revenue of $3,632,244, nearly double the revenue for the same period in 2011. ChromaDex attributes the sales spike to the successes of various pTeroPure supplements.
• In June 2011, the USDA granted pTeroPure Generally Recognized As Safe (GRAS) status, which means the product is a safe additive to any food. The designation was a green light for ChromDex to start marketing pTeroPure to the vast soft drink industry.
• ChromaDex boasts a catalog of 3,000 reference quality phytochemicals and botanical extracts, which are marketed to manufacturers in the food & beverage, pharmaceutical, vitamin, and cosmeceutical industries as well as to research labs and government entities.
• One of the products in the ChromaDex pipeline – nicotinamide riboside – is a B vitamin touted to be more effective than nicotinamide for weight loss and energy enhancement.
Last year, Cornell University granted ChromaDex exclusive worldwide rights to the novel manufacturing process for nicotinamide riboside. Scientists at the university developed this process.
• Nearly 20% of ChromaDex is owned by Dr. Philip Frost, a pharmaceutical entrepreneur and billionaire who brings instincts and weight to shareholder meetings. He also brings a hefty position in Opko Health, which has an extensive distribution network in Latin America.
• Besides its formulation business, ChromaDex also provides analytical services. The analytical services segment is profitable and involves certifying the purity of third-party ingredients and delivery systems (e.g., capsules and pill binders) intended for use in a wide range of supplements and other products. Importantly, this business affords the company an invaluable access to the inside track on industry trends that it utilizes in analyzing potential product developments of its own.
Some investors may be misinterpreting the company’s sales in its 13-year history as an indication that the company is not ready for primetime. But its progress is nearly identical to the results posted by Martek at the same point in its development. See my previous article on Trefis for my rationale.
In the words of Frost & Sullivan’s analyst Sheha Pasricha when presenting ChromaDex’s pTeroPure with the award for Most Promising Health Ingredient of the year (Chromadex) “An ingredient with proven efficacy and safety that addresses the needs of multi-populations is bound to be successful. Moreover, a sustainable production process and apt promotional, market positioning and penetration initiatives are likely to further bolster the ingredient’s potential and future market acceptance.” I couldn’t agree more.