After months of negotiations, Canadian nutraceutical products maker Forbes Medi-Tech has finally reached an agreement with Swiss group Novartis Consumer Health over the future of the Reducol cholesterol-lowering ingredient.
Forbes had licensed the rights to the ingredient, which it called Phytrol, to Novartis in 1999 for use in a number of food applications. Novartis, which created the name Reducol, formed a joint venture with Quaker Oats to sell these products, but this venture was dissolved earlier this year after Quaker was bought out by PepsiCo.
It was the dissolution of this venture which led to the negotiations between Novartis and Forbes. The Canadian firm has now agreed to pay Novartis US$2.5 million (€2.52m) for the Reducol operations, of which US$0.5 million will be offset against money owed by Novartis to Forbes. In effect, this means that the net payment to Novartis will be US$2 million paid in royalties from future phytosterol sales between 22 June 2002 and 31 December 2003.
Forbes said that a minimum of US$1.5 million must be paid to Novartis by 30 June 2003 with the remaining US$0.5 million due by 31 December 2003. If Forbes decides to seek financing in excess of US$7 million for future expansion, then the balance of the payment will have to be paid within 30 days.
The agreement gives Forbes all rights to the brand name Reducol for its cholesterol-lowering food ingredient, as well as all revenues and royalties from the dietary supplement and food business which were previously shared by the two companies.
"This new agreement with Novartis means Forbes will have all rights to sell Reducol without having to make a large upfront payment," said Charles Butt, president and CEO of Forbes Medi-Tech. "Acquiring the Reducol name will allow Forbes to capitalise on existing brand awareness and help existing customers maintain market momentum."
One of the reasons why the Novartis/Quaker venture was broken up by PepsiCo was because it had failed to live up to expectations, and it still remains to be seen whether Forbes, even with the rights to the Reducol name, can turn a higher profit from the operations than its former owners.