KGK seeks funding to bring new products to market

By Jess Halliday

- Last updated on GMT

Related tags: Finance

KGK Synergize has a full pipeline of new nutraceutical products,
and is seeking additional growth capital of between C$7 and $10m to
bring them to market over the coming years.

To date the Canadian developer, founded in 1997, has commercialized one nutraceutical ingredient - cholesterol-lowering Sytrinol, which is marketed and distributed to the US dietary supplement industry by SourceOne.

But it has been pressing ahead with developing several more product groups, and has recently retained Janus Corporate Finance as principal advisor to secure the necessary financing.

CEO and co-founder Najla Guthrie told NutraIngredients-USA.com that the next market entrant is expected to be Diabetinol within 15 to 20 months, a formulation of citrus-derived flavanoids and limonoids that is currently at clinical trial stage.

Preliminary results have been positive, indicating that Diabetinol can have a role in lowering glucose levels and preventing the onset of type-2 diabetes.

The next product, to follow in 24 to 34 months, will be Dermytol, an extract of an agricultural grain that has high levels of phenolic acid. Since it is a bi-product of the grain, the company has access to raw material supplies at low cost.

Dermytol (both an oral and a topical ingredient) is on the point of entering the clinical trial phase, following in vitro and animal studies in which it was seen to inhibit the proliferation of melanoma cells.

A cluster of other products to address prevention of several forms of cancer (colon, prostate and skin cancer) are a little further off, and more future developments may be in the areas of cardiovascular health and inflammation.

KGK previously worked with Janus in 2004, when it raised C$5m in first round financing.

Guthrie said that the company requires additional financing at this stage as its commercialisation strategy has evolved to allow it to have more control over distribution.

"KGK will still not be the end manufacturer,"​ she said, "but will work directly with each channel of distribution. "We feel it would benefit KGK to have more direct control and to move up the value chain."

The new strategy relates only to the new products; Sytrinol will continue to be distributed by SourceOne.

"Getting these new, patent-pending nutraceutical products into consumers' hands safely and quickly will require more capital than KGK can generate internally from our profitable contract research business and growing royalties from Sytrinol, our first commercialised product."

Janus Corporate Finance president Michael Walker told NutraIngredients-USA.com that sales of Sytrinol grew by more than 40 per cent in 2004, which he attributed to people looking for natural alternatives to cholesterol-lowering drugs that have science behind them, and the "great job"​ SourceOne has done on marketing.

Guthrie said the potential for Diabetanol is "tremendous"​. Although the company has been conservative in its estimates, but still it expects to be profitable in its second year and to have market penetration of 0.5 percent.

Walker said that the financing round is expected to close before the end of KGK's financial year in July. Although the process is only just getting underway, some very positive preliminary discussions have already taken place.

"As a corporate financial advisor, rarely do we see such high caliber management in an small to medium business,"​ he said. "The strategic thinking is beyond what we normally see, and is a great selling point for investors."

He added that KGK's scientific grounding is another strong attraction for investors.

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