Boulder, Colo.-Based OmegaTech to Be Acquired by Martek Biosciences

Source: Knight Ridder Business News

Mar. 27--Boulder-based OmegaTech Inc., which creates fatty nutrients critical to infant brain development, will be acquired by Martek Biosciences Corp. for $50 million in stock.

OmegaTech had been raising private financing and had plans to go public when it was solicited by a number of large manufacturers interested in its product -- an algae-based fatty acid called docosahexaenoic acid, or DHA, used in dietary supplements for pregnant women and in special infant formula.

Studies have shown DHA in mother's breast milk is critical in infant brain and eye development. More recently, scientific findings point to the important role of DHA in all adults for improved cardiovascular health.

DHA was once prevalent in the American diet, but people now eat less fatty fish and rarely consume game meat and range-free chickens, which are the primary sources for the nutrient.

"(OmegaTech) is investigating a very important nutrient, so it's not surprising that someone would want to purchase them," said Melanie Reece, a clinical researcher at Denver Health Medical Center who is working with OmegaTech on a study evaluating the effect of DHA on pregnant women and pre-term labor.

Martek BioSciences is a publicly traded company based in Columbia, Md., that makes nutritional oils for infant formula. Its executives were primarily interested in OmegaTech's intellectual property: its 100 patents, trade secrets and processes gleaned from 13 years of research.

"We're buying about $50 million to $60 million worth of research and development," said Henry Linsert Jr., Martek's chief executive officer.

Martek will issue about 1.8 million shares of common stock, worth about $50 million at Monday's $29 closing price. The firm will issue another 1.4 million shares, worth about $40 million, over the next two years if OmegaTech reaches certain sales and regulatory milestones. The deal is expected to close in four to six weeks.

After the merger, OmegaTech's 45-person Boulder operation will attempt to enrich more food products, such as milk, yogurt, bread and cheese with DHA, similar to the way calcium is now added to orange juice.

"The sky is the limit on growth," said OmegaTech CEO Mark Braman, who will become executive vice president of Martek.

"You have a market forecast for DHA revenue to be $1 billion, so the focus going forward is to drive that growth."

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