August 28, 2009
News of the joint venture between Alticor, the $8 billion global network-marketing company behind the massive Nutrilite supplement brand, and Metagenics, a leading manufacturer and distributor of medical foods and nutraceutical products through the health practitioner channel, hit August 11, 2009. Since then the two companies have been talking up the partnership and explaining how Alticor’s purchase of a substantial ownership interest in Metagenics will help Metagenics move closer to its goal of reversing the current epidemic of chronic illness in the United States.
Below is an edited transcript of Nutrition Business Journal’s recent discussion with Metagenics Chairman and CEO Jeff Katke about the new partnership.
NBJ: Metagenics has said that it searched for three years to find a financial partner. Why did you decide to join forces with Alticor?
Jeff Katke, Metagenics chairman and CEO: First of all, we have shared values. I think that is the most important thing. Alticor is a family company and so is Metagenics. They also are committed to quality and invest in it. If you look at their manufacturing, for example, Alticor adheres to a GMP standard that is very high for the nutraceutical industry. Metagenics does that as well. Metagenics has gone out of its way to make quality the focus of our company. We have achieved GMP certification through three different certifying bodies. The third shared value is our commitment to research and development. Alticor has more than 500 scientists who work in their organization, and they do clinical research—which is a unique attribute of that company. Metagenics has its own clinical research center and we have our own basic research center called MetaProteomics, where we do nutrigenomic research that helps us develop unique and more effective products for our doctor customers. So it’s those three things that make us such good partners: family, quality and commitment to research and development.
NBJ: Why did you feel Metagenics needed a financial partner?
JK: Our goal is to help reverse the chronic illness epidemic. We believe as a result of the research we have done that we have better ways to treat chronic illness than are currently being delivered in healthcare. But we needed someone bigger and stronger to help us grow and grow the awareness of our products so that we can make a dent in chronic illness.
As you mentioned, we looked for the right partner for a long time. When working on that we also considered a public offering for our company but decided that partnering with Alticor was the best fit for us.
NBJ: In the video on the Metagenics Website that explains the reasoning behind this partnership, you mention that the U.S. healthcare system is on the precipice of change and that there is a great need to move the system from a disease-care focus to one that prioritizes wellness and disease prevention. How is Metagenics contributing to this effort, and how will this joint venture enable you to further that cause and be a more influential player in the reform debate?
JK: We really believe that if healthcare reform only focuses on the way that people pay for medicine and doesn’t focus on the type medicine that healthcare practitioners provide, then we will continue to have serious problems. We believe that the medicine that healthcare practitioners currently provide needs to change because 78% of healthcare dollars in the United States today are spent on treating or managing chronic illness. Chronic illness is getting worse every day, and what we are doing currently isn’t working. Until we introduce better methods to treat chronic illness, our costs are going to continue to go up. We believe we have a better method. We believe it is much more cost effective, and we just need to help more doctors understand how they can employ it in their practices.
NBJ: Could you describe this better method?
JK: We publish clinical research every year, and some of our most recent research on treating patients with metabolic syndrome using a lifestyle program supplemented by a medical food demonstrated a very significantly better outcome than any other treatments that are used for metabolic syndrome. Metabolic syndrome affects approximately 40% of the population, and it dramatically increases the risk of heart disease and diabetes and also has a relationship to certain cancers. It is an underlying metabolic disorder that is leading to several leading causes of death. We have the research and the evidence, and we are currently engaged in a multi-centered university trial to reproduce the clinical trial that we did in our own clinical research center to validate our original findings. Now we need to get this information out to a larger group of doctors who can implement it in their clinical practices.
Having a bigger company behind us gives us the resources we need to continue to develop our research program to establish this therapy as a standard of care. Also, it gives us the size and resources to have some political influence so that we can hopefully get this type of care incorporated into the new healthcare system that the Obama administration is attempting to establish.
NBJ: During the recent NBJ Summit, one of the things that was discussed was the need for the nutrition industry and dietary supplement industry to have a more influential voice and be more proactive in helping to shape the healthcare debate to address the issues you just talked about. Now that you have this partnership with Alticor, how will Metagenics specifically use its new resources and increased political muscle to bring about the kind of change you believe is essential?
JK: I’d like to go back to what you said about the nutrition industry needing to be more proactive in this area. I don’t think the nutrition industry can impact healthcare reform or the healthcare system if it doesn’t invest in research and development to prove that its approaches are more effective. The leaders in our industry need to make a commitment to investing in research and development, and Alticor has done that and so has Metagenics. Our defined R&D efforts can establish our approach to healthcare as a more effective approach in the minds of the scientists and the politicians. You can’t go to Washington with an exaggerated claim or a belief about a system that you don’t have evidence to prove because the leaders cannot commit our country’s resources to invest in something that isn’t proven. Once we have this research and development data, then we can sit down with our leaders and say, ‘This really is a better way. This is why it is a better way, and this is how it saves money.’ We have started to do some research that is very groundbreaking in terms of our understanding of how to treat chronic illness, but there is much more work to be done.The combination of these two companies will really help in this regard.
NBJ: When you talk about how this joint venture provides Metagenics with more resources, are you referring to just money, or do you foresee actually collaborating on research projects?
JK: We see both. This brings financial resources as well as collaborative work with people who have shared values regarding health and wellness.
NBJ: Metagenics will continue to operate as a stand-along entity and your company will not distribute Nutrilite products and Alticor’s Amway business will not distribute Metagenics’ products. However, do you foresee any product development collaboration occurring between the two companies?
JK: It is really important for our business and for Alticor’s business that the two are kept independent and separate because the Alticor business serves the consumer, and they sell wellness type products. Metagenics, on the other hand, serves healthcare professionals with therapeutic products. So there is no advantage to Metagenics or Alticor to combine our products or co-distribute them. We plan to stay very, very focused on the healthcare practitioner and Alticor plans to stay focused on the consumer.
NBJ: Regarding the healthcare professionals you serve, are you seeing them become more open to the types of solutions that Metagenics offers?
JK: Yes. The National Institutes of Health has established lifestyle therapy—they call it therapeutic lifestyle change programs—as the standard of care for people with elevated cholesterol and triglycerides and metabolic syndrome. So more and more doctors are aware now that this is an important part of their responsibility in caring for patients with these types of illnesses, but they don’t really have effective systems through which to provide this care. Metagenics offers a therapeutic lifestyle change program called FirstLine Therapy, which is a turnkey system for doctors to deploy in their practices so that they can deliver effective therapeutic lifestyle change programs to their patients. In addition to exercise, stress reduction and diet changes, this program also uses medical foods that improve compliance and success of the program for the doctors. We have seen a very significant growing interest in this type of approach not only among complementary and alternative medicine professionals but also among conventional medical doctors.