Global formula launches boost Martek results

By Jess Halliday

- Last updated on GMT

Related tags: Docosahexaenoic acid

Martek Biosciences continued its recovery from the impact of
stockpiling in first quarter 2006 with a better-than-expected set
of results thanks to its infant formula clients rolling out
products on a global basis.

Income from operations was $9.3m for the three months ended January 31 2006, compared to $11.2m in the prior year period. Revenue was $629m compared to $66.5m.

Despite the drop in revenue from Q1 2005, the results do show an improvement on a consecutive basis: in Q4 2005 revenue was $56m.

Fiscal 2005 was marked by customer inventory issues which came to light last May and which caused a drop in sales as customers used up excess stock. The company said that the stockpiling was a result of some of its customers over-buying in an effort to protect themselves from supply problems that have dogged Martek in the past.

"The real impact was in the third quarter, when sales actually decreased,"​ CFO Pete Buzy told NutraIngredients-USA.com in December.

CEO Pete Linsert said that the Q1 results exceeded earlier expectations. In particular, a number of clients using Martek's DHA and ARA in infant formulas have been going global with their products, and domestic sales also increased modestly.

Martek claims that is DHA and ARA are in 80% of US infant formulas. Licensees include Mead Johnson, Wyeth, Abbott Laboratories and Nestle.

Other good news in the quarter was the inclusion of 250g of Martek DHA in a new prenatal vitamin, Citracal Prenatal + DHA, and the inking of a new infant formula license with Medici Medican in Israel.

"Recent improvements in our core business and developments in the food area position the well for the rest of 2006 and beyond,"​ said Linsert.

Indeed, the company is currently underutilizing its production capacity, as it bides its time for deals and discussions with major food and beverage companies to come to fruition.

In February 2005 it announced a licensing deal with Kellogg for the use of its DHA in food products, but long product lead time and shelf life stability studies, mean that there is still no indication of a timescale for product launch.

In the meantime, the extra capacity is having an impact on margins: gross margin percentage decreased from 41 percent in Q1 2005 to 39 percent in Q1 2006.

However certain adjustments to the manufacturing process have yielded a new, lower cost product offering, which translates to a better price point. This, in turn, may open the door for more food applications.

Since the close of the quarter Martek has reported still more positive news: in February it was announced that Odwalla will launch a soymilk product with 32mg of Martek DHA per 8fl oz serving; and PBM Products announced that it is launching an organic infant formula with DHA under its Parent's Choice brand, sold in Wal-Mart.

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