Executive Interview: Q&A with Jeff Katke, Co-Founder, CEO and Chairman of the Board, Metagenics

The practitioner channel is one of the fastest growing channels of nutraceuticals sales, and no one knows it like Jeff Katke, whose company Metagenics has the premier line of supplements used by practitioners. The company’s significant investment in research coupled with its extensive education program has put the new science of nutragenomics on the map with health professionals. Metagenics’ success makes a strong case for investing in research and quality. Jeff believes that the supplement industry has the opportunity, and indeed the moral imperative, to use its knowledge to save our society from the escalating chronic disease epidemic primarily caused by unhealthy lifestyle habits..

1) When you co-founded Metagenics in 1983 with your brothers Tim, Mike and Chris and your close friend Lyra Heller, what was your original concept and how did it evolve?

Our original impetus was the belief that chronic illness is due to the interaction of genetic weaknesses with lifestyle and that you could use properly formulated dietary supplements to optimize biochemical pathways that regulated underlying mechanisms of illness which could improve individual’s genetic potential. We therefore invested in researching biochemical and molecular mechanisms of illness and developed ways for doctors to nutritionally support their patients more effectively with products we formulated.

Back then the understanding of genetics and nutragenomics was pretty primitive, and the way genes interacted with the environment was not clear. There was an understanding of biochemical individuality. The commonly accepted belief was that people are genetically hardwired to good or bad health but we didn’t believe that. We believed that there were individual modifiable biochemical and genetic uniquenesses that could be addressed through healthy lifestyle and optimum nutrition that would help people achieve their genetic potential. This concept later became the foundation principle of a new science called nutrigenomics. Roger Williams a Nobel Lauriat from the University of Texas pioneered the biochemical individuality research and Dr. Jeffrey Bland was the leader in translating his work into the nutritional field by communicating how it applied to vitamins, minerals and functional foods. Since then the science of nutragenomics has developed and validated what we worked on in the early 80’s. Now we have a significant body of nutrigenomic research which we use to discover natural substances that produce unique beneficial effects on genetic expression.

2) Although your retail line, Ethical Nutrients, has enjoyed a certain popularity among more knowledgeable retailers, Metagenics has not really developed the retail channel. Why?

Retail just hasn’t been our focus. Because we had so much to do on the clinical health professional side it was hard to provide enough attention to the retail side and do a good enough job. We have always been practitioner focused but we have had a retail line just to satisfy pharmacists and specialty retailers since we could not sell them the practitioner line.

We have acquired Australian and European companies that have practitioner product lines as well as health food and pharmacy product lines. Therefore we will be re-emphasizing our retail brand.

3) Education to health care professionals has been a large part of your growth. How did you develop that program?

Standard Process was the first company to focus on the health professional channel in the 40’s, but we pioneered science based education programs, and the development of science based nutritional products. Metagenics conducts thousands of educational events yearly for practitioners where it introduces the latest scientific advances in nutrition and nutrigenomics.

4) With the significant growth of supplement sales in the practitioner channel more manufacturers are jumping into this space. What kind of competition are you seeing?

Well, there are a lot of small companies that develop a regional niche, but there are not a lot of large companies in our channel so far. No one has made the investment in science we have -- our competition is relatively low technology. We have a lot of people saying their products are the same as Metagenics for less money, so our biggest challenge is to differentiate.

Our robust science program makes that difference clear; we have a biotechnology subsidiary called Metaproteomics where we study how nutrients influence gene expression primarily related to their production of proteins. We have a clinical research center at MetaProteomics called the Functional Medicine Research Center where we study the nutrigenomic effects of natural products on humans. We spend approximately 6% of our annual revenue on R & D. We have 35 scientists working in our research center that have been very productive in making exciting discoveries which have allowed us to develop more effective new natural products.

Other than the more progressive ingredient suppliers, most companies are not investing in R&D and try to sell their products using borrowed science. That really is the old way of doing business that emerged in our industry in the 80s. While it is an inexpensive product development strategy, we don’t believe that companies can remain competitive using the borrowed science method.

Now it’s 2007 and the science of nutritional biochemistry has progressed well beyond that of the 80’s. There are more sophisticated ways of developing and testing products today. Nutrigenomics has emerged as the most probable mechanism by which natural products can produce powerful health benefits. I believe that the leaders of companies providing natural products must invest in quality research to prove the benefits of their products. The natural products industry has much to offer those people suffering from chronic illness caused by unhealthy lifestyle. Providing scientific proof of the effectiveness of natural products is where we must go to deliver on the promise our products have to improve the health of society.

Our quality is another point of differentiation. Companies can sell products without investment in quality. Now the final GMP rule is out and all manufacturers will eventually have to follow them. I believe the new FDA GMP regs are a very good advancement for our industry. Before FDA issued their GMP’s we took it upon ourselves to obtain triple GMP certification with the NPA, NSF and Australian TGA, to make sure our manufacturing was very high quality. In the process of applying for those certificates we learned a lot about the difference in non-GMP quality and GMP quality. There is a significant difference in quality between those manufacturers that are GMP certified and those that are not.

True quality products make a difference in the outcomes health professionals get with their patients. Practitioner experience over time makes the difference - they use the product in their clinical practice and when they experience better clinical outcomes they keep using our products.

5) Are there unique challenges to the practitioner channel?

One unique thing is that if you have invested in R&D and developed unique products that provide better health benefits, they (practitioners) have to understand how to explain them to their patients. Since we are doing very cutting edge research, medical practitioners have not been taught about these concepts in medical school and so they need some form of post-graduate support to learn the more advanced concepts. Every 3 to 5 years our knowledge of nutragenomics doubles. It is very difficult to keep up with the advancing science, which is why having a robust research staff is essential. Contradictory research is confusing so if you don’t understand the mechanism of action it is hard to stay on the sweet spot of scientific reality instead of getting diverted by fad or poor quality research that leads to a scientific dead end. Commercializing fads based upon dubious science to make a quick buck is not of long-term benefit to the customer or to the industry. Someone scientifically competent has to evaluate science so you don’t get swept off track by fads or misinformation. It is important to stay in the sweet spot of accurate science and build products around it that are profoundly effective. When you stay in the sweet spot of accurate science you have a better chance of developing products that are better than anything that has ever been developed before. These are the type of products our industry needs to deliver on the promise of better health that consumers are seeking.

6) On your web site you say “we also take an active political role in increasing and ensuring the freedom of patient choice in health care, a philanthropic role through financial support of natural medicine and functional medicine…” What kind of activities does the company engage in around these issues?

We have been active politically and have provided financial support for a number of the organizations that have worked for free access to health care choices. We also support educational organizations such as naturopathic and chiropractic colleges, as well as the Institute of Functional Medicine, with significant financial contributions. We are involved in licensing law activities state by state, both financially and with human resources, as well as legislative actions at the federal and state level regulating what doctors can prescribe in the US. We are actively supporting these type of issues in Europe and Australia as well.

Metagenics provided the original financial and human resource support for the Institute of Functional Medicine, which teaches medical doctors to understand the concept of underlying functional mechanisms of chronic illness as well as how to treat their patients with natural products to improve function and overall health. The Institute of Functional Medicine has grown to be a prominent not-for-profit educational organization and has started a significant new medical specialty of Functional Medicine, which is starting to be absorbed into some medical school curriculum. . We have contributed many millions of dollars for these purposes.

7) What research developments are you particularly excited about now?

We are very excited about our discovery of Selective Kinase Response Modulators that are found in certain plants or plant combinations. Products that can modify certain Kinase enzyme systems are a very hot area of research right now. There are about 540 known kinases in the human body and we can test approximately 250 of them. The kinase enzyme system is the method by which the human adapts to its environment. Kinase dysfunction is an underlying cause of chronic illness caused by unhealthy lifestyle. In other words a junk food diet causes kinase dysfunction as the body attempts to adapt to the junk food lifestyle. We can modulate kinases to create good health through healthy lifestyle and by the consumption of certain natural products that have specific beneficial effects on certain kinase enzymes. We call these products Selective Kinase Response modulators (SKRMs). We believe that kinase modulation is the mechanism by which natural products have always worked to improve health, but until recently this mechanism was unknown. Kinase modulation provides an mechanistic explanation to the controversial question of how food can be a medicine.

In addition to improving our natural product effectiveness through our nutrigenomic kinase research, we have also discovered natural kinase modulators that are pharmaceutical candidates that offer superior therapeutic indexes for chronic disease. We are actively seeking Pharma partners to license these technologies.

8) How did your merging with Jeff Bland impact Metagenics?

Jeff and I have been friends since the mid 70s. Metagenics had been in a business relationship with Jeff and his company HealthComm since we started and were the exclusive distributor of the medical foods Jeff developed. We had two companies with two overheads, so we merged the companies to invest more in research by reducing duplicate overhead. Merging the companies let us ramp up our R&D spending.

Jeff Bland is the most published scientist in our industry, which is one measure of scientific acumen. He has been a visionary, involved in initial industry quality programs, such as the Natural Products Association’s TruLabel testing program. He was among the first scientists to discuss Vitamin E’s benefits for improving health. He was one of the first to bring more than just anecdotal evidence into the natural product industry. In the 70’s, most of the information we had on product benefits was anecdotal with very little scientific data. Jeff conducted research on Vitamin E, then expanded his studies of nutrition. His company, HealthComm, was doing clinical research on medical food products before anyone in the industry did research on anything. Jeff brought a new concept into the quality discussion: that quality must include being scientifically valid. GMP is important but it doesn’t necessarily guarantee quality ingredients with any proven health benefit. It’s the combination of scientifically proven safety and efficacy combined with skill and discipline on GMPs that creates true quality.

9) Metagenics is founded upon the principles of nutragenomics; do you believe that personalized nutrition might be a key part of industry’s future? What obstacles and challenges might need to be addressed?

While the promise of mapping each individual’s genes and creating a personalized nutrition program to address each individual’s special needs still is very exciting, it is not a practical reality today. However personalized lifestyle programs including dietary supplements based upon biomarkers such as cholesterol, triglycerides, etc. is the current state of the art and has gained widespread acceptance.

Lifestyle choices are recognized by all major health organizations as the major cause of the chronic illness. The current medical approach of chronic disease isn’t working. Studies repeatedly show that lifestyle therapies are more effective than any other therapy. This provides our industry with it greatest opportunity for growth and increased acceptance if the industry is willing to invest in research to prove the value of our products as part of lifestyle therapy.

I feel that it is the responsibility of all the companies in this industry to increase investment in R& D in the same way the way Pharma did in its early days. Today some Pharma companies spend 25% of revenue on R&D. This large financial investment is possible in part because they have higher profit margins. However, long before it was standard practice the leaders in that industry made the decision to make a significant investment in research, which propelled that industry to tremendous success. We are poised, with the aging population, understanding of Nutragenomics, and the advocacy of lifestyle intervention for chronic illnesses, to be as big as Pharma but not unless industry leaders make the tough decisions on R& D investment.

10) You and I have had conversations in the past regarding the need for industry quality initiatives. What do you think the industry should do to alleviate concerns about product quality, other than investing in more science?

Every company needs to be GMP compliant. I feel that GMP will be a good thing, and Adverse Event Reporting will also be good for the industry. But there is still an issue of ingredient quality in terms of safety and efficacy, which is not addressed by GMP or AER’s. We need leadership within our industry in developing methods and accurate scientific information so we know what ingredients truly are safe and effective.

Since Metagenics has invested in a research center that does this kind of work, we have learned a great deal about differences in ingredients. There is extensive scientific due diligence needed to know how to select the best ingredients at the best dosage to make a supplement that can deliver the safety and efficacy benefits our consumer’s expect.

At end of the day, our industry grows by delivering to the consumer products that improve their health. If we focus, as an industry, on continuing to provide that benefit, we will continue to thrive. If we become too financially oriented and loose our quality vision, the entire industry will suffer. Every company’s profit picture will suffer.

It is popular today to be a good corporate citizen, to become socially responsible – but being “green” is just the tip of the iceberg. We have a chronic disease epidemic that threatens survival of our culture and is getting consistently worse. Our industry has been and still is the leading advocate of healthy lifestyle. Healthy lifestyle is the best solution to chronic disease. We have the answer to the chronic disease epidemic. I believe that we have never had a better opportunity for growth than we have today, if we stay focused on developing science based products that truly help to improve health.

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