NBTY becomes Ester-C owner as Zila Nutraceuticals sale completes

By Jess Halliday

- Last updated on GMT

Related tags Ester-c Ascorbic acid

The sale of Zila's nutraceutical business to NBTY, including
Ester-C, has completed, marking the new owner's entry into
ingredients and freeing up the old owner's attention for its core
cancer detection interests.

The value of the transaction, first announced in August, has been confirmed at $37.5m, with a provision for up to $3m more to be paid through an earn-out formula, depending on future performance of the business.

So far NBTY has not discussed its plans for the business in detail. A spokesperson for the company told NutraIngredients-USA when the acquisition was first announced that it plans to take Ester-C to the next level through consumer advertising, with a major campaign due to get underway next year.

"NBTY believes Ester-C will help it expand in its key markets which including the general market, comprised of food, drug and mass market retailers and among stores within the health food industry,"​ he said.

No indication has been given of its plans for Ester-E, licensed for dietary supplements in certain markets from Australian firm Phosphagenics. Zila was known to be looking at extending its rights beyond the US, Canada and Indonesia and into new markets.

For Zila the nutraceuticals division generated a rich revenue stream that it ploughed into its other areas of development.

For the nine months ended April 30 2006, Zila Nutraceuticals reported net revenue of $18m.

Amongst the benefits claimed for Ester-C over regular vitamin C is a neutral pH, which means that the vitamin is gentler on the stomach than traditional forms of the vitamin. (When people think they need to boost their vitamin C, for example when they have a cold, they have a tendency to take larger doses, which can result in an upset stomach.)

The patented process involves mixing ascorbic acid and calcium carbonate.

In May it announced the development and patenting a new form of Ester-C said to offer improved antioxidant and anti-carcinogenic potential - a move that should help keep the advantage over regular forms of the vitamin until the end of next decade, even as earlier patents relating to the old formulation expire.

Despite its exit from nutraceuticals being part of a planned-out internal strategy, Zila continued to foster progress for the branded ingredient until the end.

In the period leading up to the sale, Zila had continued to vigorously extend the reach of the ingredient into new markets, such as Korea and Taiwan. In Europe it increased its presence with a distribution deal with Gee Lawson and other new deals in Scandinavia.

On Zila's part, the decision to divest of this interest was taken as part of a strategy to divest of non-core assets in order to focus on cancer detection technologies. The sale has allowed it to pay off outstanding monies owed, and with the exception of $0.5m capital lease obligations it is now debt-free.

"This sale accomplishes several very important objectives for Zila by completing our exit from the nutraceuticals space on favorable financial terms and providing capital to fund our future strategic business objectives and operations,"​ said Douglas Burkett, chairman, president and CEO of Zila.

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