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Higher Regulatory Hurdles Attracting Not Deterring Investors

The higher regulatory hurdles being constructed in Europe and, to a lesser extent, the United States for dietary supplements and functional food ingredients have many industry participants “wailing and gnashing their teeth”—as Nutrition Business Journal writes in our upcoming 2010 Functional Food and Beverage Issue. But, not everyone believes increased regulatory enforcement and claims scrutiny will spell bad things for the global supplement and functional food and beverage industries. In fact, according to David Atkinson, managing partner and founder of Circadia Ventures LLP, tighter regulation in both Europe and the United States is “supporting rather than inhibiting investor interest” in the functional food and supplement sectors.

Atkinson made this point during Nutrition Capital Network’s February 16 Webinar, “Trends in International Financing for health and Nutrition Companies.” Although he acknowledged that increased regulation is “setting high hurdles” and “increasing the costs to the industry,” Atkinson said he does not believe—as many in the industry do—that these consequences of stepped-up regulatory oversight “will kill the embryonic sector” of the health and wellness market. “We believe the high hurdles will bring much-needed barriers to entry to the industry and will increase and improve consumer confidence,” he added. “Ultimately, it will allow some higher pricing … and add value to the underlying IP and technology of the industry.”

Investors, Atkinson said, are increasingly interested in the health and wellness space because, “despite the increased regulatory environment the industry faces, it is still likely that a functional food ingredient with very clear, proven clinical benefits could be on the market in half the timeframe of a new drug—while the actual capital costs of getting that product to market are likely to be only a fraction of what a drug would cost.”

Provexis logoAtkinson cited the small, publicly listed U.K. company Provexis as an example of a functional ingredient company that is attracting growing investor interest. “Provexis’ current market cap is over £74 million ($116 million)—a year ago it would have been a fraction of that,” Atkinson said. Helping to fuel investor appetite for this small-but-growing ingredient company is the fact that Provexis was the first company to gain an Article 13.5 health claim approval from the European Food Safety Authority (EFSA) for its tomato extract, Fruitflow.

As NBJ discusses in detail in our upcoming 2010 Functional Food and Beverage Issue, EFSA’s positive opinion has made a huge difference to Provexis. “We got our approval on the 17th of December, and we have since received a very high level of interest from global food and beverage players,” said Provexis CEO Stephen Moon. “The change has been instant. It’s almost like we have got through the desert and finally arrived at the oasis. It has raised the profile of the company.” As Moon explained, the benefits have gone far beyond his company’s ability to commercialize Fruitflow, which has been clinically proven to inhibit platelet aggregation and has been licensed to DSM. “The financial and investment community has now seen the potential of Provexis, and it’s enabled us to raise substantial capital, which is going to help us drive forward our total pipeline.” Most recently, in December 2009, Provexis announced it had raised £2.1 million ($3.4 million) via an open offer to its shareholders.

NBJ’s 2010 Functional Food and Beverage Issue publishes later this month. To order a copy or become a subscriber visit the NBJ subscription page.

Related NBJ links:

A Cascade of Global Regulatory Changes Likely for Supplements Over Next 12 Months

Global Supplement & Nutrition Industry Report 2010

M&A and Investment Activity Slows for U.S. Nutrition Industry

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