Beta-alanine royalties help drive NAI's record results

20-Sep-2016 - Last updated on 20-Oct-2016 at 14:26 GMT

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Beta-alanine revenues helped push Natural Alternatives International to record earnings in its fiscal year that ended in June.

The California-based contract manufacturer and ingredient supplier said it notched $9.5 million in net income on sales of $114.2 million for the fiscal year that ended on June 30, 2016. That amounted to earnings of $1.44 per diluted share. The company did note that those earnings figures included a one-time event, the sale of the company’s headquarters in San Marcos, CA. That sale brought in $1 million after tax. Excluding the results of that transaction from the earnings picture brought the net income figure down to $1.29 per diluted share.

NAI does a lot of private label business, and activities in that segment of the company increased $22.8 million, or 32.7%, from the prior year. According to the company this was a result of the sale of higher volumes of existing products to existing customers and new product sales to new and existing customers, partially offset by unfavorable foreign exchange rates as compared to the prior year.

Beta alanine boost

NAI has also been riding the hefty sports nutrition wave in recent years. The company holds a patent on CarnoSyn, its branded form of beta-alanine. Beta-alanine is a popular ingredient in sports nutrition formulations. NAI says that CarnoSyn is a naturally occurring beta amino acid essential for the synthesis of muscle carnosine, which acts as a buffer, delaying the onset of muscle fatigue and failure. NAI, which is primarily a contract manufacturer and which had licensed CarnoSyn to a partner, took over in 2016 the direct sale and distribution of an ingredient that it says is backed by 15 studies which show, among other things, that supplementing the body’s beta-alanine stores increased muscle buffering capacity resulted in greater physical working capacity, enhanced endurance and delayed fatigue. NAI also owns a portfolio of 14 patents on CarnoSyn in the United States and 20 in other countries.

NAI said royalty payments on CarnoSyn increased 138.3% to $21.8 million during fiscal 2016 as compared to $9.1 million for fiscal 2015. The increase in CarnoSyn beta-alanine revenue in fiscal 2016 was attributed primarily to an increase in raw material sales as a result of taking over the direct sale and distribution. The company also in March settled a long standing patent infringement lawsuit on beta-alanine with Woodbolt Distribution Inc, which agreed to sign a licensing agreement.

NAI has seen significant growth in its CarnoSyn business after the supply of the ingredient was interrupted by the 2011 earthquake in Japan. NAI recorded beta-alanine raw material sales and royalty and licensing income as a component of revenue in the amount of $4.8 million during fiscal 2013, $5.4 million during fiscal 2014 and $9.1 million in fiscal 2015. NAI recorded net sales of $73.9 million in 2014 and and $79.5 million in 2015.

"Fiscal year 2016 will go down as a landmark year for the company in sales and earnings per share. On a quarterly basis, the fourth quarter also generated considerable growth in EPS. This result was achieved through the hard work of many team members of the company. We remain debt-free with a strong balance sheet and continue to seek ways of expanding our presence in the international marketplace,” said Mark LeDoux, CEO of NAI.

Among the international expansion efforts LeDoux cited investment in new capacity at the company’s manufacturing facility in Lugano, Switzerland. He also said the company continues to invest in the science backing its ingredients.