Firm open to more M&A activity after profits more than double
Probi set sights on EFSA claim after acquisition caps ‘exceptional’ financial results
The Probi CEO said 2016 was an ‘exceptional’ year for the company in terms of growth. Indeed, the firm witnessed a 105% increase in operating profit and almost doubling of revenues as it completed the acquisition of US-based probiotic manufacturer and distributor Nutraceutix for a for a preliminary cash price of $105m (€92.41m).
The deal, which saw Probi acquire a company with turnover and profits that match it’s own, completed in October – meaning Q4 revenues were boosted by 76 million Swedish Krone (€8 million). However, Nählstedt was keen to point out that the bulk of increased profitability in 2016 has come from organic growth.
He told NutraIngredients that a large part of this growth was driven by changes in formulation to an existing major Probi customer in the USA.
“Nature’s Bounty has redesigned their top seller, Probiotic 10, to include Probi strains,” he commented. “For Nature’s Bounty it is good because the product is selling much better now that they have documented strains in it, and for Probi it has been quite exceptional sales as the result of that.”
In addition to a surge in sales on the back of the Nature’s Bounty reformulation, Nählstedt said the company had seen good growth in its home Swedish market on the back of a launch of Probi Iron, and in South Korea due to a partnership with Sanofi that has led to increased sales.
The firm also broaden distribution and for existing products thanks to deals with Ipsen pharma and work with Ikea-group owned BoFood on a lactose-free, soy-based probiotic ice cream, he said.
Acquisition strategy: More partnerships on the horizon?
Nählstedt told NutraIngredients the acquisition of Nutraceutix should contribute roughly the same revenue and profit to Probi as it’s existing business did in the past – therefore doubling size and sales in the first full year (2017).
“It is a business that has been growing in double digits historically and of course under our ownership we hope to increase that a little bit more,” he said – noting that Probi plans to use its new US business to roll out three patented strains that the firm has been working on in Sweden but had yet to commercialise.
The CEO also confirmed that other mergers and acquisitions could take place in 2017 – if the right deals are available.
“There is an interest for us to develop our company and group further and I think it would be interesting for Probi to now add more products,” said Nählstedt. “Now that we have a full value-chain of manufacturing to sales, then if we can add more products to that – it could be a really interesting way to accelerate the growth.”
He confirmed that a combination of acquisitions, licencing deals, and internal R&D are likely to help Probi pursue its goal of adding more products to it’s portfolio – noting that the way Probi structured the financing of its recently completed acquisition leaves it with low debt level.
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“We have the means to perform additional acquisitions if there should be something of interest surfacing,” he said. “We have a list that we worked up as part of the project that ended up with us acquiring Nutraceutix, but it has to be the right company.”
EFSA: Re-submission … and new claims on the horizon?
Last year also saw Probi complete several research projects, which had been set up with the specific intent of submitting EFSA 13.5 health claims applications in the future.
Of these projects, a long-term study on gut health and IBS showed significant results, said the CEO.
“We had significant results with an improvement in IBS symptoms, based on a total score (…) and we see a significant reduction in the score for people taking the active product rather than the placebo product,” he said.
“We think these results are quite interesting for the probiotic industry and we will be publishing those soon,” he added – noting that results have taken ‘slightly longer’ to publish because the company also performed microbiota analysis on the participants to investigate how gut microflora changed in responders and non-responders.
However, Nählstedt said it is too early to think about EFSA applications for the study, because it still has unfinished business with a previous dossier.
Last year Probi had a health claim application for iron uptake rejected by EFSA. The firm has already appealed the rejection, and now believes there may be a way forward with the same dossier.
“It’s very hard for us accept EFSA’s point of view on our dossier, which had 4 significant studies in it,” said Nählstedt.
“The advice we finally got was that we should re-submit the application, and that’s what we will consider doing,” he said. “We will use the information that we supplemented our application with during the stop the clock procedure, and use that experience, to adapt our application.”
The CEO added that Probi could re-submit its iron uptake dossier ‘early this year’, but said for further EFSA dossier applications it would be a case of ‘wait-and-see’ how the re-application of the iron uptake dossier goes.
“I want to see what comes out of our iron absorption re-application because each time you put out a new dossier you are making a lot of data public, and if EFSA will reject everything regardless of the quality then it may not be worthwhile.”
“We want to see what happens with the iron application before we make any more decisions on further applications,” he reiterated.