Neptune Acquires Biodroga, Alkemist Labs Celebrates Accomplishments & Other News

Neptune’s acquisition of Biodraga, personnel moves and vitamin K2 developments headlined recent industry news.

January 15, 2016

10 Min Read
Neptune Acquires Biodroga, Alkemist Labs Celebrates Accomplishments & Other News

Neptune’s acquisition of Biodraga, personnel moves and vitamin K2 developments headlined recent industry news.

Neptune Technologies & Bioressources Inc. recently acquired Montreal-based, privately held Biodroga Inc. for $15 million in a combination of cash and stock (all amounts in Canadian dollars).

Biodroga is a leading solution provider of omega-3s and other functional ingredients to branded marketers in the nutraceutical industry, primarily in North America. The company’s customized product offerings primarily include omega-3s, along with other essential nutritional ingredients used in specialty formulations. Biodroga develops and distributes these solutions as turnkey finished supplements that are ready for sale, primarily as softgel capsules and liquids.

The business combination is highly complementary and further positions Neptune for success, by adding a new growth vehicle in a significantly larger addressable market. “Biodroga offers a scalable solutions platform, with a broad range of product development capabilities and cross-selling opportunities," said Jim Hamilton, president and CEO of Neptune. “The acquisition allows us to play a much broader role in the customer value chain, leveraging our collective capabilities with an expanded set of offerings. It also opens up an important window on innovation and enhances our capabilities to develop new nutraceutical products." Neptune sees the acquisition as a key cornerstone to support additional business development. The combined company should deliver considerable value for customers and shareholders. The purchase is expected to be immediately accretive to shareholders.

“This transaction is fully in line with our strategy to move further up the value chain, and build on our current solution business by further progressing into specialized product development services, such as formulation and blending," Hamilton added. It also follows market trends in the dietary supplement space. As the industry develops, businesses are increasingly looking for tailored solutions, such as condition-specific formulations, something Biodroga facilitates.

“In my experience in this industry, it’s all about helping customers be successful," Hamilton stated. “Together with Biodroga, we can even better engage with marketers to provide the resources and agility they need to quickly launch the right product and reach important niches they target."

Robert Cajolet, president of Biodroga, lauded Neptune’s business-development expertise, leading krill oil product line, diverse customer base and extended geographic reach. In addition, “Both companies share a similar culture—a drive for excellence and quality, a strong focus on customer satisfaction and an entrepreneurial spirit. Together, we will leverage our collective strengths to channel and accelerate growth beyond what could have been done independently," he said.

Hamilton acknowledged the transaction will make for an exciting year. "In 2016, Neptune’s focus is to transition from pioneer to partner—we will bring additional services to our customers by leveraging Biodroga’s expertise. The goal is to further develop these services to North American customers through cross-selling opportunities, but also to reach international customers."

Hamilton’s 2016 election to the Council for Responsible Nutrition (CRN) board of directors will also be top of mind. "I have had both the honor and pleasure of working with the CRN board members and staff for a number of years, including as chairman," he commented. “I look forward to CRN’s continued industry leadership, especially in the areas supporting consumer trust and transparency in nutrition products."

In terms of the purchase agreement, Neptune acquired 100 percent of the issued and outstanding shares of Biodroga for CDN $15 million, consisting of $7.5 million paid in cash at closing, an additional cash consideration of $3.75 million bearing interest and payable over a period of three years, and $3.75 million worth of Neptune common shares issued at closing, representing approximately 2.6 million shares. These shares are escrowed and will be released over a period of three years. This represents a transaction multiple of approximately 5X Trailing Twelve Months (TTM) EBITDA.

Neptune funded the cash portion of the purchase price payable at closing through a recently secured $7.5 million bank loan, in addition to a revolving line of credit of $1.8 million available to support Biodroga’s growth. Furthermore, Neptune invested $1 million of cash in the capital of Biodroga, which shall be considered as restricted cash until released by the bank.

For the TTM ending Oct. 31, 2015, Biodroga had revenues of approximately $22 million and EBITDA of approximately $3 million. “Over the past three years, Biodroga has surpassed industry and segment revenue growth rates and we expect this trend to continue going forward," stated Mario Paradis, Neptune’s CFO. Considering Neptune’s revenue expectations of $5.1 million for the third quarter ending Nov. 30, 2015, and excluding intercompany sales, the combined entity would have annualized sales of close to $41 million on a pro forma basis.

As part of the borrowing arrangements for this transaction, Neptune’s subsidiary, Acasti, has agreed to support Neptune by granting to the bank a limited recourse pledge in the amount of $2.0 million (the “committed funds"), in accordance with a security agreement with respect to deposits entered into between the bank and Acasti at closing of the acquisition of Biodroga (the “pledge agreement"). Consequently, the corresponding amount shall be considered as restricted cash for Acasti until released by the bank or the outstanding amount is reduced by Neptune.

In connection with the completion of the transaction, Neptune and Acasti have also entered into a licensing agreement for Neptune to market Onemia®, a medical food of Acasti, pursuant to which Acasti will receive a royalty payment of 17.5 percent on net sales made by Neptune.

Alkemist Labs announced it received ISO 17025 accreditation by the American Association for Laboratory Accreditation (A2LA). The lab also met the AOAC analytical laboratory accreditation criteria committee (ALACC) guidelines that were newly revised to include criteria specific to testing dietary supplements. Both independent benchmarks further substantiate Alkemist Labs’ stated commitment to the highest standards of testing. The scope of accreditation to ICO/IEC 17025:2005 certificate #3851.01 is valid through February 2018.

The ISO 17025 accreditation demonstrates a lab meets managerial and technical quality benchmarks as required by the International Organization for Standardization ISO/IEC 17025, "general requirements for the competence of testing and calibration laboratories" for the tests performed within Alkemist’s scope. It involved a thorough assessment and review of the lab’s quality management system and competence to perform dietary supplement identification and qualitative analysis HPTLC testing and botanical identification and qualitative analysis by microscopy.

This certification meets the A2LA P112 flexible scope policy, which states: “There are circumstances in which a laboratory performs testing activities for which it can not identify either standard test methods prepared by national, international or professional standards writing bodies or in-house developed non-standard methods on their fixed scope of accreditation. These situations usually arise when the laboratory requires flexibility in allowing for changes in the matrices within a product area (flexibility concerning object/matrix/sample) or with respect to parameters (flexibility concerning parameters/components/analytes)" which allows the lab discretion to adapt method parameters to a wide variety of preparations and products to best meet customer needs.

“Flexible scope is a significant advantage with some natural products that are more complicated to test," said Elan Sudberg, CEO of Alkemist Labs. “It is another indication that our capabilities are tailored specifically to the unique needs of our industry."

Holly Johnson, Ph.D., Alkemist’s laboratory director, added, “I am delighted [A2LA] granted us a flexible scope, which indicates confidence in our expertise to apply appropriate valid methods in a complex and fluctuating product market."

In addition, Alkemist Labs also met the more specific requirements of AOAC  ALACC’s “Guidelines for Laboratories Performing Microbiological and Chemical Analyses of Food, Dietary Supplements and Pharmaceuticals." Accreditation to this guidance demonstrates Alkemist Labs has technical expertise and quality systems specific to the dietary supplement, food and pharmaceutical industries which go above and beyond those of ISO/IEC 17025.

The Natural Algae Astaxanthin Association (NAXA) welcomed industry veteran Traci Kantowski as its new communications director. She will support the association’s efforts to promote natural algal astaxanthin to the industry and help advance the association’s business strategy.

“Traci is a skilled communications and marketing professional with deep knowledge of the natural products industry," said Scott Steinford, NAXA president. “We are excited to have Traci’s talent and enthusiasm on board to promote natural astaxanthin worldwide."

Kantowski brings more than 15 years of marketing communications experience to NAXA, having served as a natural products industry marketing and communications consultant for the past seven years. Prior to that, she held several leadership roles at CarryOn Communications, including senior vice president, leading the agency’s consumer products and health division.

BRC Global Standards and certification body NSF International successfully delivered four roadshows across India from the 2nd to the 6th of November. The roadshows, which attracted more than70 delegates per session, provided insight into the BRC Global Standard for Food Issue 7 and the Global Markets introductory program, specially designed for manufacturers in emerging markets such as India.

Some of the highlights included:

• An overview of the BRC food certification scheme and the Global Markets program, presented by the BRC Global Standards team
• Analysis of audit reports from manufacturers in India, identifying typical nonconformities across different product sectors
• An explanation of the audit process and NSF International’s relationship with BRC Global Standards
• A case study presented by Devi Fisheries Ltd., showing how BRC certification gave them a more defined focus and an increased integrity of the supply chain.

As a result of the roadshow success, the BRC Global Standards team is planning additional visits to India in 2016, and looking to appoint a local representative. The organization will be exhibiting and presenting at a number of food safety and food processing conferences in relevant sectors. Further information will be published on the BRC Global Standards website.

“India is one of the fastest-growing countries for BRC Global Standards, and we want to encourage and support that growth," said Tessa Kelly, operations director BRC Global Standards.

SuperNutrition reformulated its legacy Women’s Blend, Men’s Blend and Super Immune multivitamins, as well as its Calcium Blend, adding NattoPharma’s MenaQ7® as its source of vitamin K2 (MK-7) at a full 180 mcg. All four products are available now.

“We are fortunate to partner with NattoPharma of Norway," said Kathy Mooney, SuperNutrition CEO. “We selected their MenaQ7, the only clinically validated form of K2 as MK-7, specifically because of its superiority and the growing scientific research supporting it."

Gnosis S.p.A. made available a new web resource, “vitaMK7® Multi Benefits." Featuring a downloadable infographic, the section points to recent research indicating the importance of maintaining an optimal amount of vitamin K2 as menaquinone-7 in every stage of life.

HORN, one of North America’s premier distributors of specialty ingredients, chemicals and raw materials, introduced Yvette Altuna as senior credit manager to oversee the company’s credit department. Altuna joins HORN with 18 years of experience managing credit departments in the chemical distribution industry.

“Yvette’s industry knowledge is unquestionable, but her energy and enthusiasm are traits that will go a long way in supporting our sales team in serving our valued customers," said Julie Wubbena, chief finance officer, HORN.

Altuna is a 17-year member of Credit Management Association and previously served as vice president at a local chapter in Southern California. She was hired as the successor to Guy Nishida, who retired as HORN’s senior credit manager in December 2015.

SPINS, a leading provider of retail consumer insights, analytics and consulting for the natural, organic and specialty products industry, announces the addition of Susan Szymanski as vice president, marketing. Szymanski, a progressive marketing expert with broad experience in the publishing, event and research area, will be responsible for pioneering new marketing initiatives.

Company CEO Tony Olson pointed to Szymanski’s deep-rooted experience and extensive knowledge of marketing and publishing strategies in the foodservice industry as a great fit, noting her “creativity and ability to establish marketing systems and assets will expand and bring a fresh voice to the SPINS brand footprint."

Szymanski more than 22 years' experience in the restaurant publishing field with Lebhar-Friedman and Winsight, where as a vice president, she led sales teams, conceptualized and executed events, initiated content platforms, set marketing tactics and standards, redesigned and was instrumental in the building of new growth platforms. In addition, for the past 20 months, she served as the executive director of marketing at Technomic Inc.—where, under her guidance, the firm completely relaunched its brand image, brand platform, sales and marketing strategies and event formats.

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