ChromaDex: From Standards Provider to Industry Innovator Print E-mail
By Rob Goldman   
Friday, 13 August 2010 02:38

A number of management teams over-value the underlying assets and business model in which they attempt to execute. Others have significant assets but do not know how to monetize them to take their respective companies to the next level. That is what makes the leadership of ChromaDex Corporation (OTC BB: CDXC.OB) so unique.

Not only do they recognize the company has monetizable assets, but it understands the underlying leverage it has in its hands today and is shifting the business model to effectively lever and monetize those assets in a broader, more profitable business model.

ChromaDex is a leader in the fast-growing U.S. nutrition industry which is an estimated $150 billion market. With 3,500 reference standards, ChromaDex is the gold standard supplier of phytochemical standards for the quality control and research of natural products such as supplements, cosmetics, food/beverages, and pharmaceuticals.

This growth has spawned a big increase in regulatory activity. ChromaDex is the greatest beneficiary of trends such as the recently finalized GMP (Good manufacturing Practices) by the FDA in June 2010. This segment is driven by the need for reference standards, research tools and other QA methods to be in place ensuring that the products for consumers are safe and effective.

Management is leveraging its expertise and reputation as a standards and services provider by creating or licensing IP in the space and introducing novel and innovative new products. ChromaDex has a number of products in its development pipeline, and launched its first product, aimed at the dietary supplement market, in April 2010. This product, known pTeroPure™, is based on Pterostilbene, a licensed compound found in blueberries grapes and other small fruits. In laboratory tests, it shows promise for improving cardiovascular health, glucose levels and cognitive function.

One of the main reasons why this product could be a game-changer is that pterostilbene is chemically related to resveratrol, a compound that is plentiful in the skins of red grapes. Resveratrol is thought to be at least partly responsible for the health benefits attributed to drinking red wine, which include cardiovascular health and cancer prevention and is a $1 billion in annual sales product.  Management believes that pterostilbene could emerge as the next-generation resveratrol.

While the core business is chugging along, and ChromaDex is leveraging its market intelligence garnered from the services relationships with customers to introduce in-demand products, it also plans to lead the wave of M&A in the space. Thus, ChromaDex is now poised to grow organically and inorganically.

Investors are confident that ChromaDex can emerge as a major player is the fact that Teva Pharmaceutical’s Chairman, Dr. Phillip Frost, led the most recent financing and is the largest shareholder.  One of the most successful entrepreneurs and leaders in health care, his participation is a tremendous asset, as he is an active investor and advisor. Clearly his presence and guidance ensure success.

With the launch of a blockbuster product, the asset of a huge library of IP and standards, ChromaDex is poised to be a force in the nutraceuticals space. Plus, a series of M&A transactions could catapult revenue, earnings and valuation over the next 6-12 months, and while $3.50 is in reach, $5.00 is not out of the question either, as the Company executes its M&A strategy and new production introductions.

 

 

Disclosure: No Positions

Author Rob Goldman has 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, Rob was a senior member of Piper Jaffray's Technology research team. Goldman Small Cap Research produces timely, actionable, research on publicly-traded emerging growth companies. Their primary coverage is on the Health Care, Technology and Natural Resources sectors.




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