Nestle Medical Foods

How medical foods offer growth opportunities for Nestlé, packaged foods industry

In a corner of a technical research university campus in Lausanne, Nestlé SA scientists are untangling genetic profiles to develop medical foods — one of the company’s big hopes for sales growth.

​These aren’t the high-energy protein bars that people buy over the counter before a workout. Instead, the Swiss food company is tapping into an estimated $15-billion market for prescription-based powders and drinks intended to meet specific nutritional requirements to treat diseases.

For Nestlé, it’s a market with big potential, amid an aging global population, as the company navigates tougher times in its traditional packaged-food market. Sales of frozen pizza and ice cream have struggled. It has missed its sales-growth target of 5% to 6% three years running.

“For a long time, nutrition has been seen as a sort of pseudoscience,” said Ed Baetge, head of Nestlé’s Institute of Health Science, or NIHS. “For many conditions like age-related dementia, for example, there is a major clinical need for new approaches, and where food can make a big difference.”

But for skeptics, the sector is a Wild West with uncertain benefits.

Unlike dietary supplements, medical foods are intended for people with chronic diseases rather than for healthy people. They must be used under medical supervision because they are intended to manage serious illnesses, like Alzheimer’s.
The products have active ingredients derived from food products or dietary ingredients that are generally recognized as safe by the US FDA.

In a basement of the Nestlé institute’s four-story office building in Lausanne near Lake Geneva, machines costing nearly $1-million each analyze human DNA to develop personalised programs for conditions like epilepsy and intestinal disorders that are tailored to specific genetic profiles.

Armed with this knowledge, the scientists will develop medical foods containing natural compounds extracted from foodstuffs like tomatoes, coffee and grapes.

Set up five years ago, the institute is halfway through its $500-million budget, which runs to 2021, although it has projects that extend beyond then. And Nestlé has been on a US-focused acquisition spree.

Earlier this year the company signed a deal to help US biotech company Seres Therapeutics to develop products aimed at restoring bacteriological balance in the digestive system. It also bought a stake in Pronutria Biosciences, a Cambridge, Mass, startup developing amino acid-based products to treat muscle loss.

Demographic trends support these investments

The proportion of people over 60 — a key group for medical foods — is forecast by the WHO to rise to 22% globally by 2050 from 12% at present.

“We want to have a significant impact on the company’s overall profitability over the long term,” said Greg Behar, who heads Nestlé’s Health Science business, which markets products developed from findings at the institute’s labs.

Analysts are generally upbeat about the potential of Nestlé’s health business, which also includes nutritional supplements and foods for people after surgery, saying it grew faster than the rest of the company’s operations in 2015 to post sales of about 2-billion Swiss francs ($2.1-billion). Nestlé aims to increase that amount to 10-billion francs in the next few years. ​​

But there are concerns about the time needed to bring such products to market and the hefty research costs.

Although medical foods don’t need premarket review and approvals like drugs, they must be based on what Nestlé calls “sound medical and nutritional principles”, ​and the FDA subjects​them​to monitoring. ​

Not all experts are convinced. “While it’s clear that what we eat and drink has a substantial effect on our health, there is currently insufficient evidence documenting that these foods provide a medically relevant effect,” said Ben Locwin, a scientist who works with the American Association of Pharmaceutical Scientists.

Many products may have a placebo effect with consumers “thinking” they benefited when they hadn’t, he said, calling medical foods the “Wild West” of the industry with many new entrants.

Dr Philip Gerber, a specialist in clinical nutrition at University Hospital Zurich, has used medical foods more in the last few years, but needs more data. ”I am not sure we will see a huge exploding market here; these products have to prove how effective they are.”

Nestlé said that before market introduction, studies must be conducted showing that its products are safe, beneficial and effective in meeting the nutritional requirements of patients.

In addition, some of its products, like one being developed to help remission of inflammatory bowel disease, are being developed through the conventional trials process.

“It is very important for us to have clinical evidence,” said Nestlé Health Science spokeswoman Marie-Françoise Rütimeyer.

Still, patient groups welcome the initiative.

“I don’t care if it’s traditional pharmaceuticals or a medical food,” said James Hendrix, director of global science initiatives at the Alzheimer’s Association in the US. “There is a huge unmet medical need.”

Source: Wall Street Journal, Nestlé