As an investor in ChromaDex (CDXC), and a user of their lead product Tru Niagen, I’m a firm believer in the health benefits of Nicotinamide Riboside (NR).
NR in its consumer form is more commonly known as Niagen, which is the only commercially available form of NR. A natural supplement, which has received NDI status and a GRAS certification, NR has been used in numerous studies that have clearly demonstrated its effectiveness in increasing NAD+, an essential molecule found in every living cell.
Why is it important to maintain, or increase NAD+ levels as we age? Well, NAD+ enables cells to convert the food that we eat into the energy that we need. It is also the communication molecule between the cell nucleus and the mitochondria which are the energy producing factories in the cell. If NAD+ levels are low, then communication may be impaired and mitochondria dysfunction may result.
Sadly, as we age, NAD+ levels decrease. This is why NR, as the only proven way to increase your NAD+, is becoming a very popular supplement. And, this popularity is not only seen in increased retail usage, but NR is also popular among researchers who want to learn more about its health benefits. There are currently over 120 Material Transfer Agreements in place (basically third party research being performed) that involve Nicotinamide Ribosone from ChromaDex.
Over the course of the next 12-24 months, we will get to see the results of these trials. I expect these to follow in the footsteps of previous trials; i.e., they should hopefully all have very positive results confirming the efficacy of NR in a variety of health benefits.
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As the health benefits of NR become more evident, through trial data, it is logical to expect that Niagen will become a much more sought after supplement. Consumer awareness of Niagen should increase dramatically over the next few years due to marketing campaigns. Sales should follow the same pattern.
To date, the clinical data has been impressive, with more to follow. Human studies of Nicotinamide Riboside are registered on the U.S. National Institutes of Health website, www.clinicaltrials.gov.
As an investor in CDXC, I’m very comfortable with the long term sales trends for Niagen, assuming the trials continue to show efficacy. I truly believe that NR will be the next major supplement and could eventually reach $1B in sales globally.
My one area of concern when looking at ChromaDex as an investor was around the IP. Assuming Niagen sales take off, how can we get comfort that CDXC will reap the benefits? Will there be competitors entering the market? Will there be knockoffs?
These were the questions I had for management, and their ongoing lawsuit against Elysium, in which Elysium appears to be marketing a knockoff version of Niagen, had me going to management, looking for answers to these potential issues.
ChromaDex has a very solid IP lock on Nicotinamide Ribosone
With the full caveat that I’m not a lawyer, much less an IP expert, I have reviewed the patents on NR that are licensed by the Company as well as those developed in house. It appears that ChromaDex’s IP portfolio is considerable and represents a significant barrier to anyone trying to develop their own form of NR.
Below is a list of US patents the Company has on NR. They also have international patents in many different jurisdictions including, importantly, China.
In particular, the patent licensed from Dartmouth College, 8,197,807, appears to be a crucial patent. There is a lot of verbiage contained in the patent, but this line is a decent summary: “The present invention is further a method for identifying a natural or synthetic source for nicotinamide riboside.”
My read of this line is that the patent covers all scaled production of NR. This has been confirmed on calls with management, who have told me roughly the following: the Dartmouth IP covers all pharmaceutical use of NR, how to create NR at scale, and, basically, how to use NR to increase NAD+.
Thus, I feel comfortable that Niagen is a very protected supplement from an IP perspective. However, more important than my read on the IP protection of NR is the endorsement by Li Ka Shing of their position.
Earlier this year, through his investment vehicles, the Hong Kong based billionaire invested $25M into CDXC. My understanding surrounding this investment is that Mr. Li’s due diligence focused squarely on the patent protection around NR.
This, of course, makes sense. Why else would he invest so much money into a company that doesn’t have a well protected patent portfolio. Had he wanted to, I’m sure Mr. Li could have created an in-house version of Niagen in one of his Chinese companies.
The fact that Li Ka Shing not only invested in ChromaDex directly, but has now entered into a sales agreement with them (through AS Watsons, a drug store chain of 6,000 locations which he controls), demonstrates to me the solid IP platform from which ChromaDex is operating.
As Goes Niagen, So Goes ChromaDex
The bottom line here is that Niagen is poised to be the next blockbuster supplement. It feeds into the demographics of aging populations, especially in China and Japan, two countries known for their use of natural supplements.
I believe that global sales of Niagen will accelerate for the next few years. This has the potential to be a blockbuster supplement, and soon.
Meanwhile, the patent protection around it appears to be strong. ChromaDex has a monopoly on legal production of Niagen and the ability to enforce this globally, it appears. Thus, as much as I expect Niagen to become a billion dollar supplement, I fully expect CDXC to match it lockstep in terms of revenue growth.