Martek to supply Mead Johnson worldwide with exclusive deal

By Clarisse Douaud

- Last updated on GMT

Related tags: Martek, Docosahexaenoic acid, Omega-3 fatty acid

With its new supply agreement with Mead Johnson Nutritionals,
Martek Biosciences solidifies its position in the world market for
DHA and ARA, as alternative omega-3 sources are approved for infant
formula use.

Martek manufactures nutritional oils that contain the long-chain polyunsaturated fatty acids DHA (omega-3) and ARA (omega-6) from microalgae. Under the new deal the company will serve as the exclusive worldwide supplier of such ingredients for all Mead Johnson infant formulas.

The 10-year term agreement expands the scope of an existing 25-year license signed in 1992, under which Martek was a supplier to Mead Johnson in the US but not on a worldwide level.

Mead Johnson claims to be the largest infant formula manufacturer in the US, as well as a leading worldwide producer. Martek says its DHA and ARA are already in 80 percent of US infant formulas, and Mead Johnson accounts for more than 50 percent of its sales in this market. Other licensees include Wyeth, Abbott Laboratories and Nestle.

DHA (docosahexaenoic acid) and ARA(arachidonic acid) are naturally present in breast milk and additional doses given through formula may help infant brain and eye development, especially if mothers are not breastfeeding.

The omega-3 producer stands out among the crowd because of the vegetarian source of its ingredient. Rather than being derived from fish oils, Martek's blend of DHA is made from algae grown in stainless steel fermentors under tightly controlled manufacturing conditions. The company maintains this process eliminates the risk of oceanic pollutants and toxins that may be present in fish or fish oils.

Market researcher Mintel has identified omega-3 fortification as one of the major trends for 2006. Interest in these fatty acids has grown significantly in recent years as studies link DHA and EPA to heart health, and cognitive development and function.

"Recent improvements in our core business and developments in the food area position the company well for the rest of 2006 and beyond,"​ said Henry Linsert, Martek CEO, "This agreement illustrates the importance and long-term acceptance of Martek's vegetarian DHA and ARA in infant formula"​.

Until February 2006, Martek was the only source of DHA and ARA the FDA approved for use in infant formula. The government agency has now expanded approval to non-vegetarian sources, such as fish oils.

However Martek denies that this new development has presented it with immediate competitors in the supply market for infant formula.

"Martek is not aware of any customer with plans to switch to DHA derivedfrom tuna oil or any other fish oil sources for use in infant formula tobe sold in the US,"​ the company said recently.

To date the company has been underutilizing production capacity - biding time for deals with major food and beverage companies, such as this one with Mead Johnson.

In February 2005 it announced a 15-year licensing supply agreement with Kellogg for the use of its DHA in food products, but long product lead time and shelf life stability studies have hampered the launch date, which Martek investor relations representative Kyle Stults estimates will be in 2007.

According to Stults, the first "mainstream" product using Martek DHA was recently launched in the US by beverage company Odwalla Inc, owned by he Coca Cola Co. Odwalla's soymilk is said to be the first soymilk in the US to contain the omega-3 fatty acid.

Martek is looking to find its place in adult functional foods as well as infant formula. We would like to make products that go "throughout the life cycle"​, said Stults.

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