In an earnings call with analysts, CEO Frank Jaksch detailed the strong tide of clinical evidence supporting the ingredient and its strong sales. One question that always hovers in analysts’ minds when a company like ChromaDex shows a big increase in sales of single product is, that’s good news, but who’s buying the stuff? If it’s one big customer, that comes with an inordinate amount of risk in their eyes. Jaksch said new Niagen customers have been enrolled and that he expects the market for the ingredient to continue to grow through 2017.
“We expect to as we continue to penetrate the market throughout the end of 2016 and 2017 for the number of those customers to grow. Suffice it to say that we have more than five or six large customers and we expect that number to continue to grow on the ingredient side,” Jaksch told an analyst.
Jaksch also detailed developments in the company’s latest ingredient, an extract of blue corn that delivers a high level of anthocyanins. ChromaDex began developing the ingredient more than a year ago via a deal with Suntava, the company that developed the purple corn variety (and which is now part of a larger company called Healthy Food Ingredients, or HFI). At the moment, the ingredient has not made much of a splash in the marketplace (it’s not even listed on ChromaDex’s website), Jaksch said, because all of the available supply is going to a single customer. But he said the upscale promise of the ingredient is large.
“The advantage of purple corn is that it’s a more cost-effective way of delivering an anthocyanin. The traditional anthocyanin sources are typically berries, berry biomass, blueberries or cranberry or grape or others. The anthocyanin [market] is an under tapped and underserved market right now. And that’s largely because of cost issues associated with the production of high purity anthocyanins and that’s an area that we think can be leveraged,” he said.
ChromaDex began as an analytical laboratory, and that business still forms an important part of the balance sheet. The company began its foray into ingredient development with pTeroPure, its nature identical, synthesized form of pterostilbene. ChromaDex spent a significant amount of capital on the ingredient’s development and initial promotion and launched a direct to consumer brand called BluScience to try to popularized the ingredient’s benefits, which are centered on its high antioxidant potential. ChromaDex subsequently sold the line to a Canadian supplement marketing firm where sales languished, and the brand has since been take off the market. In response to an analyst’s question as to why he had so little to say about pTeroPure, Jaksch seemed to indicate its future potential is limited and that stand alone dietary ingredients don’t perform as well in the market as combinations. ChromaDex has already combined pTeroPure with caffeine in a co-crystal form it branded as PurEnergy. And he said new combinations with Niagen are being investigated as well.
“We are actually now looking at combinations of all of our ingredients including nicotinamide riboside. . . . The dietary supplement market in general likes to use combinations of ingredients in some cases rather than just single, stand alone ingredients and of course there is the ability for additional intellectual property that can come from the combination of various ingredients in some cases as well,” he said.
ChromaDex reported net sales of $8.8 million for its second quarter of 2016, which ended on July 2nd. That represented a 45% increase over the $6.1 million in net sales notched in Q2 2015. Reflective of the company’s increasing pivot toward being an ingredient supplier, sales in the ingredient segment hit $6.2 million in the quarter, compared to $3.4 million in same period a year previously, representing an 83% increase. The company still hovered at the fringe of profitability, though, as it recorded a loss of $83,000 for the quarter, mostly attributed to an additional $313,000 charge to retire debt from Hercules Growth Capital that was higher cost than the company believes it can obtain in the future.