Functional Foods

Nutra-pharma convergence: the threats and opportunities

This is a fascinating scenario playing out. The pharmaceutical industry is currently experiencing a rather precarious period, often referred to as the “patent cliff”, ie the mass expiry of drugs patents.

As Euromonitor has reported, the situation is further compounded by a dearth of new potential blockbuster drugs, which does not bode at all well for the future. It is no surprise, in an attempt to compensate for declining revenues, that ‘big pharma’ is looking for other ways of generating new revenue streams. And the prosperous nutraceutical, as well as the functional foods and beverage industries, look ripe for the picking.

‘Nutra’, as these industries are often referred to, has indeed shown highly encouraging growth in recent years. Fortified/functional foods and beverages, for instance, enjoyed a 44% rise in retail value sales between 2005 and 2010 across the 32 markets in which Euromonitor International conducts its in-depth health and wellness research.

Global value sales of functional bottled water rose by 70% over 2006-2011, while those of vitamins and dietary supplements (VDS) increased by a commendable 50%. It is easy to see why pharmaceutical companies are hankering after a slice of this market, especially as there is such a considerable overlap with its own realm of expertise.

The scene is already rife with examples of pharma dabbling in the nutra camp, and very successfully at times. GlaxoSmithKline, for instance, is the long-standing owner of the Lucozade functional sports and energy drinks brand, a product which started off under the name of Glucozade as a convalescent drink served in Irish hospitals.

Lucozade now ranks seventh among global sports and energy drinks brands, with global value sales of US$1 billion in 2011, up from US$897 million in 2006. GlaxoSmithKline also owns Lovaza, an FDA-approved prescription omega-3 fish oil product used for lowering high triglyceride levels.

Merck also sells a broad range of fish oil supplements under the Seven Seas brand while in April 2011 Bayer launched Arctic Wonder Krill Oil in the US. Pfizer owns Centrum, the world’s top-selling multivitamin brand, and Japanese pharma giant Otsuka Holdings claims the leading share in Asia Pacific’s sports and energy drinks market owing to brands like Pocari Sweat and Oronamin.

With the pharmaceuticals industry already having a firm foothold in the nutra camp and its desire to gain market share intensifying, it is easy to see how VDS companies and functional food and beverage players may get slightly edgy. Furthermore, pharma’s research and development budgets are enormous by comparison. According to Bernstein Research, drug companies’ R&D spend in Europe exceeds that of the food industry by around 10 times. In addition, pharma’s expertise and capacity to carry out “gold standard” clinical trials dwarfs that of the nutraceuticals and food industries.

Pharma – competitor and partner — If any food company is cut out to face big pharma head on, then it would be Nestlé. Nestlé remains the undisputed leader of the global packaged food market, also ranking third in global soft drinks. In 2010, the company amassed US$78.2 billion in global value sales in packaged foods and soft drinks combined.

Nestlé has made no secret of its ambitions of moving into a more medicalised direction. In 2010, it announced the creation of two new corporate entities, Nestlé Health Science SA and the Nestlé Institute of Health Sciences, with the core objective of straddling the gulf between food and pharma. Its focus is on tackling the growing burden of chronic health conditions, such as cardiovascular disease, diabetes, obesity and Alzheimer’s disease, brought on by changing lifestyle patterns and population ageing.

And the company is clearly set on going where no food company has ventured before. In March 2013, Nestlé reported its involvement in a breakthrough research programme, licensed from US-based biotech company VitaCyte LLC, which employs stem cells derived from human adult cells to investigate the causes of metabolic diseases, such as diabetes as well as gastrointestinal and brain health.

It is also moving into other areas which were once considered the sole preserve of medical science, for example the field of cancer care. In March 2012, the company launched a nutrition guide for cancer patients undergoing chemotherapy and radiotherapy to aid in the prevention of the rapid muscle loss and weakening of the immune system which are common side effects of these heavy duty treatments. Initially, the booklets will be available in public hospitals and private health centres and via cancer associations in Catalonia, with the aim of extending their distribution across the rest of Spain.

This example of a food company working in tandem with pharma, where all three sides (not forgetting the patient!) stand to benefit, shows that there is plenty of scope for nutra to develop complementary strategies – and even foster symbiotic relationships – with the pharmaceutical industry, rather than fixating on pharma eroding its market share…..

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