The company announced recently that Jaksch will transition to the role of executive board chairman in late June when Rob Fried will replace him as CEO. Jaksch said the ongoing evolution of the company’s strategy is the reason for the move, rather than any unease investors might have over the company’s immediate direction.
“My move is a predicted move. I’m not a consumer products guy. Even though I have worked in the area of dietary supplement ingredients for the past 18 years, most people know me for my chemistry background,” Jaksch told NutraIngredients-USA.
Pivot toward finished goods
The past five or six years ChromaDex started to move away from being primarily a lab company to being an ingredient developer and now a finished products company. First came the licensing of pTeroPure, the company’s nature-identical form of pterostilbene. The company’s acquisition of the patents around Niagen, its branded form of nicotinamide riboside, which itself is a form of vitamin B3 or niacin.
ChromaDex has been developing the ingredient over a period of years, and until recently has sought to be a supplier to finished goods brands. That strategy changed when the company had a major falling out with a key customer, Elysium Health. The breach of that agreement is the subject of an ongoing lawsuit.
In the wake of the collapse of the Elysium agreement, ChromaDex received a $25 million investment from Hong Kong businessman Li Ka-Shing, which was aimed at commercializing an anti-aging finished product in Hong Kong and Macau. Much of the heavy marketing spend in the fourth quarter and into the first quarter of 2018 was aimed at building out that business, Jaksch said. Despite the drain on the company’s bottom line, the strategy is starting to bear fruit, he added.
Niagen is a cofactor in the body’s NAD pathway. NAD, or nicotinamide adenine dinucleotide, is a coenzyme found in all living cells that plays a pivotal role in redox reactions. A decline in NAD has been theorized as a facet in the senescence of cells, and as such Niagen, which has been shown to boost these levels, has a strong anti aging positioning.
“We think we have a substantial opportunity with Niagen. In fact, we think it’s a huge opportunity,” Jaksch said.
Big investments in finished goods strategy
The investment from Li, which was part of the $48 million the company raised last year, will help ChromaDex fulfill its finished goods strategy going forward. The company plans to sell its finished product online in the US as well as through AS Watson stores, the worldwide retail chain controlled by Li, who by some measures is now the world’s wealthiest individual.
Last year the company sold its legacy analytical lab in Boulder, CO to Covance for $7.5 million. The company still retains lab space in Colorado at a newer facility that will support ingredient development. In 2012 ChromaDex also acquired Spherix, a regulatory consulting firm, primarily for the purpose of conducting its own regulatory fillings for the entry into new markets.
That work has enabled the company’s finished goods brand—Tru Niagen—to start showing up on store shelves in Singapore. A Singapore investment firm last month acquired a 25% stake in Watson. Taiwan is the next near term target for Tru Niagen, and Jaksch said the regulatory framework is being laid for the brand’s entry into Europe, Japan, South Korea and Australia.
Jaksch said with the large number of clinical trials underway for Niagen, including an NIH partnership working toward an orphan drug filing, the ingredient has a solid underpinning for the future. He said his view is starting to pivot toward what’s next.
“A big chunk of the operations today are really ChormaDex as a consumer products company,” Jaksch said.
“I will continue to work with trade associations, I’ll be working on lobbying efforts. But substantially I’ll be working on trying to develop new stuff. We are now kind of like an ingredient think tank. We have a great model for identifying opportunities like we did with Niagen and pTeroPure,” he said.
“I still have a lot at stake here. I’m the co-founder of the company and still one of the largest shareholders,” Jaksch said.
In the first quarter of 2018, the results for which ChromaDex posted last week, the company reported net sales of $6.6 million, up 95% compared to $3.4 million from continuing operations of the first quarter of 2017. The increase in sales in the first quarter was driven by growth in the sales of Tru Niagen. For the first quarter, Niagen-related revenues were $3 million, which represented 65% first-quarter sales and Tru Niagen sales were 71% of Niagen related revenues.
As has been the case for many quarters, ChromaDex spent more than it took in. The company reported operating expenses of $11.5 million, up by $8.1 million from the first quarter of 2017. The prime drivers were spending to support the entry into Singapore as well as $2.4 million in legal costs relating to the Elysium litigation. The net loss attributable to common shareholders for the first quarter of 2018 was $8.4 million or a negative $0.15 per share as compared to a net loss of $1.9 million or $0.05 per share for the first quarter of 2017.
The company’s share price has taken a beating over the past year. ChromaDex shares traded at a 52-week (and all time) high of $6.92 in late 2017. They sell for $3.54 today.