Online opportunities — not loss of big account — drove finished products shift, ChromaDex CEO claims

ChromaDex is a company that began as a testing and laboratory services firm, but branched out into ingredient development. Its first branded ingredient was pTeroPure, a nature identical, synthesized form of pterostilbene, a polyphenol found in blueberries and other botanical sources.  ChromaDex launched a finished products line called BluScience to try to more rapidly raise the market profile of the ingredient. That business was subsequently sold to a Canadian company​​, and at the time Chromadex CEO Frank Jaksch said that the exercise was about raising awareness, not about becoming a finished products company per se. 

This latest go round is different, though, Jaksch told NutraIngredients-USA. In March the company acquired the assets of Healthspan Research, which had been founded by a board member.  Using that company as a platform, the product, called TruNiagen—based on Niagen, ChromaDex’s branded form of nicotinamide riboside—will be sold directly to consumers.  Jaksch said having this plan in place was part of the negotiation with Hong Kong billionaire Li Ka-Shing, who in April bought $3.5 million worth of the company’s stock in a private placement with an option to invest a further $21.5 million. 

Collapse of major supply contract

All of this comes in the wake of the collapse of ChromaDex’s relationship with Elysium Health, its major customer for Niagen.  Elysium was marketing an anti-aging supplement that used Niagen and pTeroPure as its major ingredients.  The company was founded by MIT anti-aging researcher Dr Leonard Guarente, PhD, and featured a who’s who of scientific talent on its advisory board.  But in a suit filed in late 2016 ChromaDex alleged that Elysium was not paying its bills.

Losing a big supply contract is always a severe blow in the development of a new ingredient.  So ChromaDex’s action in trying to get the ingredient on the market itself could be seen as a defensive move, or one take out of desperation.  But Jaksch claimed that this shift had been contemplated for a while, and the way the market has changed since the early days of pTeroPure makes this iteration far more potentially viable.

“​We believe we have an amazing ingredient,​” ​Jaksch said. “​The amount of science behind this product and where the science is going is just incredible.​

“​We know that science and we know the topic better than anyone, and we think we are in the best position to educate the consumers,​” ​he said.

Online component makes latest effort different

A couple of things differentiate this latest finished product foray from the earlier BluScience effort, Jaksch said. The amount of research behind NR is greater than that for pterostilbene, and in the intervening years the opportunities for online sales have increased exponentially.

“​The dynamic has really changed with the opportunities within the direct to consumer market,​” ​Jaksch said.  “​With BluScience we went the traditional route in trying to get it on the shelves in places like GNC, Walmart and Rite Aid. With this new model we have a lot more opportunity for eduction.​”​

Opportunities in China

Proving the product has legs in this new environment could have a huge upside for the company. One of the stated goals of the  Li investment is to bring the product to the markets in Hong Kong and Mainland China.  According to World Bank figures, 10% of China’s 1.38 billion people were age 65 or older in 2016​​, and that percentage is expected to increase rapidly. So the anti-aging market there is potentially huge, and according to one source, Chinese consumers now make more than 12% of their purchases online​​.

Jaksch also said this latest direct-to-consumer strategic shift marries well with the current mood of venture capitalists.

“​There is definitely a lot of activity in the venture capital community looking at investing in ways to disrupt traditional distribution channels in the dietary supplement market and other markets.  Look at Dollar Shave Club. They didn​’​t reinvent the razor but they reinvented the sales and distribution of razors and they did pretty damn well with that,​” ​he said.