Cash infusion from Nestlé buoys ChromaDex as it works to get costs under control

10-Nov-2022 - Last updated on 10-Nov-2022 at 17:08 GMT

TruNiagen, ChromaDex's finished product brand, is marketed for healthy aging. ©Getty Images - Phil Bradbury

A cash infusion from Nestle and an uptick in online consumer sales has buoyed ChromaDex as executives say the brand is on course to be in plus EBITDA territory by the end of fiscal 2022.

In a recent earnings call with analysts, ChromaDex executives outlined how a new deal with Nestlé Health Sciences is reshaping the company’s finances. The CPG giant was the lead investor in a round that raised $7.7 million net of fees for the ingredient developer and finished products brand in the company’s third quarter of fiscal 2022.

Lots of research, but no profits

ChromaDex markets its ingredient Niagen, a branded form of nicotinamide riboside, as both a B2B offering and a finished product, which is sold under the TruNiagen banner. The ingredient has been researched for a wide variety of indications mostly within the healthy aging space. The company has a boasted in the past of the large number of completed studies on the ingredient. But that thick sheaf of research results has yet to translate into durable market success.

ChromaDex brought in $17.7 million in top line revenue in the quarter, which was down 1% year over year. More than $14 million of that was attributed to sales of TruNiagen, which is being sold in a variety of formats, most prominently on Amazon, where sales rose 20% in the quarter. The rest came from B2B sales of Niagen. But the company reported an operating loss of $3.1 million in the quarter, which nevertheless was far lower than the $8.8 million operating loss in the same period a year previously.

Much of ChromaDex’s costs have come by way of legal fees incurred in its ongoing court battle with Elysium, which was once the company’s biggest B2B customer. ChromaDex is pursuing an appeal of a patent ruling in a Delaware court as part of that case, the costs of which will bring the company’s full year legal spend to about $7 million.

Interim CFO cutting out costs

But within that dismal news the company found a silver lining. ChromaDex brought on an interim chief financial officer, Briana Gerber, who said progress is being made in weeding out costs.

“I'm proud to say we accomplished the first step in our objective reporting an adjusted EBITDA loss of only $1.2 million. Our underlying profitability is approaching cash flow breakeven, and we remain on track to achieve breakeven or better in the fourth quarter,” Gerber said. Her remarks were part of an earnings call with analysts that was posted in transcript form on the site seekingalpha.com.

Stock traders seem to still be taking a cautious view of the company’s prospects. ChromaDex’s share price is down about 70% in the past year. The company’s stock is trading at about $1.88 today, down from more than $6 a share in mid November 2021. The company’s recent high share price of almost $14 a share came in early 2021.