ChromaDex, which also offers laboratory products and services and which has a regulatory consulting arm, surged forward mostly on the strength of ingredient sales. CEO Frank Jaksch said the results are a vindication of sorts of the company’s recent strategic initiatives.
“Science, clinical and research backed are definitely key drivers in our success in ingredient growth over the past 5 years. Our business model of identifying and licensing IP from universities and research institutes, has also been a key driver as most of the data generated during the research stage has been published in peer reviewed journals, and by the time we get to the market with commercially available ingredient, there is usually a significant amount of published research that we can point to,” Jaksch told NutraIngredients-USA.
ChromaDex has developed several branded ingredient in recent years. These include pTeroPure, the company’s bioidentical form of pterostilbene touted for its antioxidant benefits, and PurEnergy, a co-crystalline ingredient that teams pTeroPure up with caffeine for a timed-release ingredient that has found uptake among the marketers of energy and sports nutrition products. The company has also licensed and further developed Niagen, a branded form of nicotinamide riboside. The company says it has preclinical, published data that shows that Niagen, cell-permeable NAD+ precursor, blocked axon degeneration and cell death.
Jaksch said that ChromaDex takes a multimodal approach in evaluating new strategic targets. A number of interesting science stories in the ingredient development sphere have faded from view in recent years because they involve niche ingredients targeting niche markets. Jaksch said ChromaDex always tries to keep the potential end market positioning in view.
Evaluating potential markets
“When ChromaDex evaluates potential ingredient technologies, one of the important factors in the selection process is broad based market interest. If an ingredient technology cannot make the leap from dietary supplements into other markets like sports nutrition, food, beverage, medical food, infant nutrition, skin care, or even pharmaceutical, we are probably not going to take a serious look. We have seen some interest in the sports nutrition space with Niagen and we expect that to be a growth category,” he said.
Many of those intriguing potential ingredients floundered because costs could not be brought into line. Building up a suite of science behind and ingredient costs time and money, and if the production of the ingredient cannot be streamlined, the whole effort can spiral out of control well before the commercialization phase comes into view. Jaksch said ChromaDex tries to map out that process from the point of entry into a new ingredient field.
“Cost of course will always come into play, and new ingredient technologies will most likely be in the premium category, especially for the early adopters. A big part of our job is to manage supply chain from day one, and work to lower production cost as there is an increase in demand. If we do our job correctly we should be able to lower the ingredient cost to better serve to cost threshold of a much larger population,” he said.
Jaksch said more research is scheduled on Niagan and that the company was in talks with three Fortune 500 companies that are interested in featuring both Niagen and pTeroPure in their products in the near future. Jaksch said he expects the new data will expand on the Niagen NAD+ precursor story, to move from mitochondria to NAD+ deficiency as a key nutrient deficiency linked to metabolic disorders and aging.
“I think that consumers are more informed, largely due to access to information. There needs to be a lot of published science from well renowned universities and researchers backing the ingredient technology, but even that is not enough on its own. Credible published science will also start to attract media attention, and the more media attention the ingredient gets the more consumers will become aware of the ingredient. Increased consumer awareness will drive interest not only in the ingredient but the products on the market that contain it,” Jaksch said.
A key feature of ChromaDex’s record result was the fact that the company has essentially reached the break-even point. Despite the record recent results, the company has been posting consistent losses, too, and this is now starting to turn around. For its second quarter 2015 ended on July 4, 2015, ChromaDex reported record net sales of $6.1 million, an increase of 58% as compared to $3.9 million for the same quarter a year previously. This increase was largely due to increased sales in its ingredients business segment, led by its Niagen branded nicotinamide riboside. The ingredients segment generated record net sales of $3.4 million for Q2 2015, an increase of 98%, compared to $1.7 million for Q2 2014, and a sequential increase of 27% as compared to Q1 2015.
The core standards and services segment also posted its largest quarterly sales ever of $2.4 million for Q2 2015, an increase of 28% compared to $1.9 million for Q2 2014. Net sales for the scientific and regulatory consulting segment were $318K, an increase of 15% as compared to $277K for Q2 2014. The net loss attributable to common stock holders for Q2 2015 was $315K or ($0.00) per share as compared to a net loss of $1.7 million or ($0.02) per share for Q2 2014. Excluding the $507,000 of share-based compensation expense in the quarter, which the company remarked is a “non-GAAP measure,” would show a net income of $192,000.