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In-Depth Look at ChromaDex and Its Clinical Results

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ChromaDex (OTC: CDXC) released positive clinical safety data today on its flagship ingredient, pTeroPure. ChromaDex is traded on the over-the-counter markets and saw heavy volume following the news, despite closing the session unchanged in price. Small companies are particularly complex and, oftentimes, risky for investors, so this news release should be evaluated carefully.

The two-month study of 80 adults at the University of Mississippi was double-blind, randomized, and placebo-controlled. Participants were administered 100-250mg doses daily of pTeroPure (pterostilbene), a natural antioxidant found within blueberries, and as the company had hoped, "results showed a lack of adverse reactions and no major adverse events." Trading volume in ChromaDex increased substantially after the safety data release, although the stock price closed flat, as investors still await the health benefit results which are "scheduled to be released within a few months." ChromaDex also provided distribution guidance for its pTeroPure-based dietary supplement line: "expected to be available in more than 25,000 retail stores by year-end 2012, as well as through major online retailers." What is ChromaDex? What are some of the reasons might want to take interest in (or avoid) this natural products company? Below is an in-depth look at some critical factors to consider.


Established in 1999, ChromaDex is a publicly-traded natural products company based in Irvine, California, with laboratories in Boulder, Colorado. It provides natural additives (like pTeroPure) and quality assurance testing for vitamins, foods, beverages, cosmetics, and pharmaceuticals. It also publishes comprehensive phytochemical reference manuals (several thousand pages in total) used in laboratories across the nation. Currently, ChromaDex sells five dietary supplements at GNC (NYSE: GNC), Walgreens (NYSE: WAG), and, with plans for more products in the future. Laboratory services are the core of its 13-year-old legacy business, but the company is now positioning itself as a solutions producer based on the advantageous information flow that its laboratory produces. It is important to note in the introduction that the company is not profitable and carries risks for common shareholders. The following sections provide a deeper look into its current situation, future goals, and obstacles to success.


ChromaDex has a market capitalization around $60 million, including the business conducted under two subsidiaries: ChromaDex, Inc. and Chromadex Analytics, Inc. Approximately 19% of the company is owned by Dr. Phillip Frost, the CEO of Opko Health (NYSE: OPK). Other significant stakeholders include Barry Honig and Michael Brauser of InterCLICK (acquired by NASDAQ: YHOO). All three men have recently increased their holdings in ChromaDex.


ChromaDex increased overall revenue by 30.6% from 2010 ($5.8M) to 2011 ($7.6M). The company expects revenue to continue growing in 2012, primarily due to sales of BluScience, its dietary supplement line. Expenditures for the company include chemical licensing fees, production logistics, raw materials, as well as customary expenses like payroll, facilities maintenance, and advertising. In 2003, ChromaDex used some of its cash to acquire a competing natural product company called Napro Biotherapeutics (now Tapestry Pharmaceuticals), although acquisitions have not been a significant part of the company's growth strategy. The company today provided guidance that distribution of BluScience products will increase to approximately 25,000 brick-and-mortar locations by the end of 2012.

Intellectual Property

ChromaDex claims that one of its competitive advantages is its intellectual property portfolio. Specifically, it has several licensed patents for resveratrol, pterostilbene (pTeroPure), cyanidin 3-glucoside (C3G), and nicotinamide ribocide (NR). ChromaDex holds various patents for these ingredients, most of which have expiration dates extending at least five years. Currently, ChromaDex sells pterostilbene to several outside companies that incorporate it into nutrition products like LifeExtension, Jarrow, pTeroBlue, Douglas, and Solaray. Because ChromaDex runs one of the largest quality assurance laboratories in the nation for phytochemicals, third-party companies rely on ChromaDex for purity-controlled pterostilbene and other natural ingredients. ChromaDex's laboratory is highly focused on natural products, however, and thus generates less revenue than major laboratory companies like Thermo Fisher Scientific (NYSE: TMO).


ChromaDex's BluScience products are available in-person and online at Walgreens, GNC, and Although the company has not made any official statements, it is likely that ChromaDex will work with these distributors for product placement of any new lines, such as its upcoming ProC3G. Internationally, ChromaDex has signed distribution agreements in Europe, South America, Korea, and India. These countries were selected based on their growth profile for novel dietary supplement and food additive industries. Of course, the international market is competitive, and ChromaDex faces competition from competitors abroad, such as Phytolab in Germany, Eurofins in France, and Sanofi throughout Europe. These competitors operate in similar spaces and have the scale and resources for large customer accounts. However, as ChromaDex is compliant and familiar with domestic U.S. regulations for phytochemicals, ChromaDex's larger competitors do not strictly compete with ChromaDex, especially its BluScience revenue. ChromaDex has licensed patents for its current and future product offerings (pterostilbene, NR, C3G, etc.) and thus enjoys legal protection for its patented health claims. These patents may need to be extended, or additional patents may need to be acquired, in order for ChromaDex to sufficiently protect its intellectual property in future years.


No stock analysis would be complete without looking at the risks for the company. Although no one can offer a complete analysis of a company for any investor aside from a licensed professional, here are some points to consider. First, one of the main risks to ChromaDex is further deterioration of the global economy. Because ChromaDex's BluScience dietary supplements are not prescribed by doctors, a general reduction in expendable income might have a negative impact on voluntary consumer purchases. Note that although ChromaDex derives the majority of its sales from U.S. consumers, the company also has international exposure as well, as mentioned earlier. Another risk for ChromDex is that all the effort spent in research and development may not materialize for the firm as expected. As previously announced, ChromaDex expects to release efficacy results from its human clinical study of pterostilbene within a few months. (Safety data was released today, indicating that pterostilbene is safe for sustained human consumption. Efficacy, or health benefit data, from that study is being processed and is "scheduled to be released within a few months.") Investors know that pterostilbene is a natural chemical in everyday food like blueberries, but until efficacy data is released, its use as a higher-potency dietary supplement does not have proven patient outcomes, despite various studies giving positive indications. A final risk for investors to consider is whether ChromaDex will be able to commercialize new products based on NR or C3G. Although ChromaDex would be a first-mover in the NR and C3G space, it might encounter any number of difficulties, such as advertising NR as a neuropathy treatment or an alternative to Abbott Labs' (NYSE: ABT) Niaspan. Commercializing products is always a difficult task, and although ChromaDex has done the work necessary to patent its compounds and technology, moving from the laboratory to drugstore shelves is always a difficult process.


In all, ChromaDex is a small-cap company with potential yet, at the same time, some obstacles to profitability that it must overcome. ChromaDex is also complex because of its revenue mixture from institutional, educational, and consumer clients. Institutions rely on ChromaDex for laboratory testing services; universities rely on ChromaDex for phytochemical reference manuals and purity-controlled production; and consumers rely on ChromaDex for dietary supplements (both under the ChromaDex brand as well as third-party brands that use ChromaDex's licensed ingredients). It is a 13-year-old company that has cash flow from a legacy business to fund the build-out of new pharmaceutical and dietary businesses. The company is not profitable, however, and still has to prove to investors that it can manage its debts and execute on its long-term business objectives.

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