Martek rides wave of life'sDHA expansion in Q3

By Clarisse Douaud

- Last updated on GMT

Related tags Infant formula Docosahexaenoic acid Martek

Based on its Q3 financial results, Martek Biosciences is finally
cashing in on its investment into developing branded vegetarian

The manufacturer reported revenues of $77.8mn for the quarter, up 11 percent over the previous year's quarter. Net income from operating activities also increased, month over month - from $4.6mn in 2006 to $6.1mn in 2007. With a slew of new product deals in 2007, the company attributes this growth to the expansion of applications for its ingredients beyond what was previously limited to the infant formula market. "Martek's improved financial performance this quarter resulted from growth in both sales of DHA for uses other than infant formula and sales of DHA and ARA to infant formula customers, combined with an improved gross margin,"​ said Martek CEO Steve Dubin. The company's branded DHA (docosahexaenoic acid), life'sDHA is made from microalgae under tightly controlled manufacturing conditions. Martek differentiates life'sDHA as being free from the contaminants that may be present in fish oils. Both DHA and ARA (arachidonic acid) are found in human breast milk and are important to infant development, but Martek has been looking to expand beyond this market as its hold on it in the US may not be so tight from here on in. The company's vegetarian source of omega-3 DHA is used in foods, beverages, infant formula and supplements, while omega-6 ARA is used only for infant formula. "We have dedicated much time and effort on the Company's key 2007 focus areas: increasing penetration in international infant formula markets; expanding the use of DHA outside of infant formula; improving gross margin and profitability and developing new products to support future growth,"​ said Dubin. The company has continued to invest heavily into the research and development into further food and beverage applications for life'sDHA, and the scientific evidence supporting its use as a healthy ingredient. Martek spent $6.8mn on R&D in Q3 2007 over $6.2mn in Q3 2006. "These efforts are beginning to pay off as indicated by this quarter's operating results,"​ said Dubin. The recent line-up of product additions includes brands such as WhiteWave Foods, Breyer's Yogurt, General Mills' Yoplait Kids and Central Lecher Asturiana's ABC infant yogurt in Spain. The company's gross profit margin was up 34.8 percent in Q3 2007 from the previous year - going from 36.1 percent to 38.5 percent. A recent amendment to Martek's ARA license and supply agreement with DSM resulted in higher volumes compared to 2006. This, combined with improvements in DHA productivity, had a positive impact on the quarter's margin. The amendment of the agreement with DSM related to ARA purchased in previous years. As a consequence of the new understanding, Martek experienced a third quarter margin gain of approximately 2.5 percent.

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