Swedish probiotics player BioGaia is welcoming a 5-year, €50.8m extension to a licensing deal with Nestlé for use of its Lactobacillus reuteri probiotic strain in infant nutrition products.
Nestlé will invest 80% of the fee up front this quarter, with €10.8, “paid and accounted for on achievement of certain milestones.”
BioGaia president Peter Rothschild told NutraIngredients the deal affirmed the Swiss food giant as its biggest client and the significant income boost – that would more than double its total 2011 revenue of 315m Swedish krona (€35.87m) – would help drive extension of its own brands, conduct research and broaden distribution.
“This deal gives us a secure income for a set period whereas before that was not the case,” Rothschild said, noting Nestlé had the option to manufacture the strains itself but was leaving that with BioGaia for the time being.
The deal is exclusive to Nestlé infant formula products although there is an option for extension into other areas such as intestinal health.
“This deal keeps brings us even closer to Nestlé so we are very happy,” Rothschild said. “We are also conducting ongoing research with them.”
In a statement Rothschild added: "The collaboration with Nestlé has developed into a close partnership and we are very happy to be able to offer Nestlé solutions which are unique and effective. We look forward to developing the collaboration further.”
“In addition, the acquisition of the licenced rights as such constitutes a very attractive deal for BioGaia now that we are through the new agreement have secured income that otherwise would not have been guaranteed under the original contract.
The other initiatives with Nestlé may also open new business opportunities with other customers in different fields and also increase the distribution of BioGaia-branded products."
Like almost every probiotics player, the company has had claims rejected by the European Food Safety Authority (EFSA), but it said the rejections had, “not affected us in the slightest” as the company, “did not do consumer data”.
“We can show the clinical data to the doctors and they can decide for themselves. But we continue to invest in new science and may submit other claims to EFSA at a later date.”
The company was encouraged by growth in emerging markets with latin America and the Middle East performing well, and a new deal just inked in Morocco, although it was being held back in China by an elongated regulatory approval process.
“It’s a 1.5-2 year process typically,” Rothschild said.