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ChromaDex Shifts to Direct-to-Consumer Model

An obsession with eternal youth is in vogue, and not limited to Americans; the global antiaging market is projected to grow from $250 billion last year to $331.4 billion in 2021, according to a report by Orbis Research in Dallas.

Irvine-based ChromaDex Corp.’s flagship ingredient, nicotinamide riboside—commercially available as Niagen, a vitamin B3 supplement said to boost energy—will join the expanding shelf of antiaging products designed to erase the appearance of wrinkles, sagging skin and graying hairs.

“It’s clear” Niagen is the company’s “largest opportunity,” said Chief Executive Frank Jaksch, who indicated ChromaDex will focus on its Tru Niagen brand through the direct-to-consumer model instead of selling its ingredients to “other supplement companies.”

It acquired brand Tru Niagen when it bought Santa Monica-based Healthspan Research LLC in March. Healthspan formerly licensed the main ingredient for the product from ChromaDex. Tru Niagen is marketed through ProHealthSpan.

The purchase marks a shift in company positioning from an ingredients developer to a supplements maker in order to boost margins.

ChromaDex describes itself as a natural products company that discovers, acquires, develops and commercializes patented and proprietary ingredients that target the dietary supplement, food, beverage, skin care, and pharmaceutical markets. It licenses technology to other companies that make their own products under their own brands.

But the 17-year-old company plans to ramp up commercialization. “The lab chemistry business is a big part of our DNA,” Jaksch said, “but growth would be in our consumer Niagen product. The focus now is to drive consumer awareness through the direct-to-consumer model.”

The company said dietary supplement Niagen targets nicotinamide adenine dinucleotide, or NAD+—which is critical for energy metabolism and DNA repair—to increase cellular energy production, resulting in an enhanced feeling of well-being, energy and cognitive function.

Cellular energy powers all of the body’s functions, including maintaining heartbeat and enabling thought processing. Preclinical research has suggested increased NAD+ levels help fight aging.

Jaksch said the company’s $7.5 million sale last month of its analytical testing service business in Boulder, Colo. to Princeton, N.J.-based Covance Laboratories Inc., the food solutions business of Laboratory Corp. of America Holdings in Burlington, N.C., will help fund its growth. The deal, which is expected to close in September, could be worth up to $8.5 million including an additional, up to $1 million, earnout payment from Covance.

“The sale wasn’t an out-of-the-blue, a whim—we’ve been planning to get in a position to do something like this one,” he said.

ChromaDex has over 120 collaborative studies with universities and research institutions, including the National Institute of Aging, Massachusetts Institute of Technology and the Scripps Research Institute.

It recently traded at $3.26 per share for a nearly $143 million market cap, and generated revenue of $26.8 million last year, approximately $16.8 million in the ingredients segment, $9.4 million in the contract services segment and $600,000 in the regulatory consulting segment. Sales grew over 20% from $22 million. Its net loss last year was $2.9 million.

Overseas Expansion

Jaksch said international markets factor significantly in terms of its growth, highlighting Asia—Hong Kong, Taiwan, Singapore, Macau and China—as primary markets because of a $25 million investment led by Chinese businessman Li Ka-Shing that closed last month. The Hong Kong billionaire made the buy via one of his investment vehicles, Horizon Ventures.

“To have a high profile investor like Mr. Li Ka-Shing is a pretty significant investment for us … As a strategic investor, they bring a lot more to the table than just the money,” Jaksch said. Li owns CK Hutchison Holdings Ltd., which Forbes says is the biggest health and beauty retailer in Asia and Europe through retail pharmacy A.S. Watson. The retail, health and beauty business generated more than $20 billion in revenue in 2015 and has more than 12,000 stores. In connection with the Li Ka-Shing investment, ChromaDex expanded its board of directors from seven to nine. New investors—Hong Kong-based Champion River Ventures Ltd. and Pioneer Step Holdings Ltd.—nominated Tony Lau and Wendy Yu, respectively, effective Aug. 18. Lau oversaw the consumer and retail segment at Horizons Ventures, and Yu was chief digital officer of Horizons Digital Group.

Fewer Competitors

Since incorporating Tru Niagen as an in-house brand, ChromaDex has taken steps to strengthen its new consumer products business. Jaksch said the company has pursued termination of previously signed supply contracts.

“There are currently 20 supplement [brands] selling products containing [Niagen] in the last 12 months. Since launching our own brand … we are slowly reducing the amount of competition out there to a handful, including our own product.”

He pointed out that while the company hasn’t directly suffered from online price competition, it has seen prices for supplements that include its ingredient drop by half since the Amazon.com market became competitive.

“Now that we have our own consumer product, we are working to clean up that environment and keep our product in a premium price range.”

It also opened an office in Los Angeles and is hiring “for a different skill set, whereas previously we were more R&D, we are going to be hiring mainly people with [experience in] direct-to-consumer product business, internet technology, branding and sales and marketing,” Jaksch said.

Its employee base will be about 60 after the sale of its analytical business, down from nearly 100.

They will be based in four locations: Irvine, L.A., Longmont, Colo., and Rockville, Md. The recently finished research and development laboratory in Colorado will focus on identifying and developing additional indications for its antiaging metabolite. Maryland is home to its regulatory consulting group.

The company also plans to develop a clinical pipeline focused primarily on very rare pediatric diseases. It plans to start a phase one trial for Cockayne’s Syndrome next year. The disease is characterized by growth failure, impaired development of the nervous system, photosensitivity, eye disorders and premature aging.

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