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Nutrition 21 - addressing Type 2
Diabetes, Obesity and Depression markets with its patented nutrition products
Healthcare
Biotechnology & Drugs
NASD: NXXI
Nutrition 21, Inc.
4 Manhattanville Road
Purchase, NY 10577
Phone: 914-701-4500
Gail Montgomery
Chief Executive Officer
Interview conducted by:
Walter Banks
Co-Publisher
CEOCFOinterviews.com
July 2002
Bio of CEO,
Gail Montgomery has been President, Chief Executive Officer and a Director of the
Company since September 29, 2000, when she succeeded Fredrick D. Price. From July 1999 to September 2000, she served the
Company’s Nutrition 21 subsidiary in various capacities, most recently as Vice
President and General Manager. From November
1998 to July 1999, Ms. Montgomery was President of Health Advantage Consulting, a
consulting firm that provided strategic planning, new product introduction, and market
development services to the nutrition industry. From
1992 to 1998 she worked for Diet Workshop, a diet franchise network, most recently as
President and CEO. From 1979 to 1992, Ms.
Montgomery has served in various capacities in the health and fitness sector. She received a BA from Douglas College of Rutgers
University in communications.
Company Profile:
Nutrition 21 is a leading developer and marketer of nutritional supplements whose health
benefits have been substantiated in "pharmaceutical-type" clinical research. A
market leader in nutritional chromium, Nutrition 21 currently holds 35 patents for
nutrition products; 25 for chromium compounds and their uses. Nutrition 21's patents cover
the use of chromium picolinate for maintaining healthy blood sugar metabolism, for
promoting healthy lean body mass, and for supporting healthy lipid metabolism. Nutrition
21 has successfully leveraged its expertise in clinical development and technical research
to market proprietary health enhancing nutraceuticals.
Flagship product for the diabetic and Syndrome X markets:
Diachrome™ is a proprietary compound, whose synergistic effect capitalizes on two
active ingredients: Chromax® chromium picolinate - Helps to
improve insulin sensitivity, potentiates the uptake of glucose in the muscle cells,
increases glycogen production Biotin - Stimulates the
activity of glucokinase in the liver, improves pancreatic ß-islet cell function to
enhance insulin regulation.
Ingredients business:
Nutrition 21's ingredients business specializes in the marketing and sales of proprietary;
science based mineral ingredients for the nutritional products industry. Ingredients are
sold in bulk to nutritional supplement manufacturers who incorporate these minerals into
dietary supplements. Applications for Nutrition 21 products include dietary supplements,
nutraceuticals, capsules, tablets, soft-gels, beverages and other innovative nutritional
products. Nutrition 21's ingredients have been widely incorporated into over 1,000
products distributed throughout the United States.
Key ingredients sold: Chromax® chromium picolinate,
Diachrome™ chromium picolinate & biotin, Selenomax® high selenium yeast,
SelenoPure™ L-selenomethionine (yeast-free), Zinmax® zinc picolinate, Magnemax®
manganese picolinate and other fine mineral yeasts.
Finished Consumer Goods:
Lite Bites®:
Lite Bites® Fat-Fighting System is a total lifestyle program focused on weight loss that
includes bars, chewies, shakes and boosters in a variety of satisfying flavors. Lite Bites
is formulated with Chromax® chromium picolinate plus 22 important vitamins and minerals,
fiber, calcium, and a custom herbal blend.
Selenomax® High Selenium Yeast and L-Selenomethionine:
Selenium, an essential trace mineral, is a crucial mineral antioxidant that protects cells
and tissues from free-radical damage. It is needed for the body to synthesize its own
natural antioxidant, glutathione. Several epidemiological studies have associated
increased incidence of poor health with low levels of dietary selenium. Selenium’s
antioxidant activity protects cells and tissues from free radical or oxidative damage.
Thus, there is reason to believe that optimal selenium intake may provide protection from
free radicals, carcinogens, mutagens, UV light, and certain infectious agents. This damage
is thought to be linked to the aging process, as well as found in many degenerative
diseases.
CARDIA® SALT:
CARDIA SALT is an all natural product made from no artificial ingredients. CARDIA
SALT’s patented formulation contains 54 percent less sodium than regular salt (135mg
versus 295mg per 1/8 teaspoon serving), as well as added levels of important minerals
potassium (90mg or [2.5 mEq]) and magnesium (7mg or [0.3 mEq]). CARDIA SALT also contains
L-lysine monohydrochloride, a naturally-occurring amino-acid, which helps to mask the
bitter taste normally associated with potassium and to enhance the product's real salt
flavor. CARDIA® SALT is appropriate for people who want to reduce their intake of sodium,
a leading contributor to hypertension (high blood pressure) in salt-sensitive and certain
other population groups.
CEOCFOinterviews:
Ms. Montgomery, please give us a brief history of Nutrition 21.
Ms. Montgomery: “Nutrition 21 had its roots as a
pharmaceutical biotech company, first as Applied Microbiology, Inc. and then later known
as AMBI Inc. which was started in the mid-eighties. Eventually it out-licensed its drug
development technology and staked a claim in the development of for nutritional compounds
supported by pharamcuetical quality clinical trials. With the acquisition of Nutrition
2patent portfolio focused on mineral picolinates, the company created a foothold in
patented nutrition products. We have further
developed that patent portfolio and the clinical research supporting the portfolio that
revolves around chromium with the intent to address the Diabetes, Obesity and Depression
market.”
CEOCFOinterviews: Does your background in pharmaceuticals and
biotechnology, give you an edge over other nutritional companies?
Ms. Montgomery: “Absolutely! We think that it is one of the
company’s core competencies and it is definitely a differentiating factor. The world
of nutritional products is a very crowded space. Very few companies have patent protection
and very few of them understand the clinical development pathway that guides the
development of drugs. While we are not positioning our products as drugs, we are
interested in validating their efficacy. Whether as a preventative nutritional therapy, or
whether as a therapy that actually can be used managing these diseases we are looking for
evidence-based medicine to substantiate the value of our products.”
CEOCFOinterviews: Do you do these studies yourself or do you
partner with universities?
Ms. Montgomery: “We have done both. Most of our
research is done in cooperation with universities where the funding is partially supplied
by us; recently the NIH (‘National Institute of Health’ an agency of the
Department of Health and Human Services) and the ADA (American Diabetic Association) have
expressed interest in funding one of the
research programs that we are sponsoring. On the other hand, there are times when we go to
a contract research organization and we commission a study. We have run the gamut on
design and funding, however, I would say that the bulk of our research is done in
affiliation with universities.”
CEOCFOinterviews: What are some of the studies conducted done on
your products?
Ms. Montgomery: “We are currently working with Duke University
on the research of chromium and depression; we are working with the University of Miami on
issues regarding selenium’s impact on AIDS and immune function. We are working with
the University of Buffalo and Oakland Children’s Hospital on two studies of our new
compound called Diachrome™. The University of Vermont has been doing many of our
chromium studies as it relates to people with diabetes.”
CEOCFOinterviews: Currently, how are you generating your revenues?
Ms. Montgomery: “Our primary revenue stream comes from the
sale of ingredients to the dietary supplement arena. Our flagship product has been ChromaxÒ Chromium Picolinate.. The nutritional applications for Chromium
Picolinate in diabetes, cholesterol and weight management are patented, and we protect
those applications through licensing agreements with many of the largest vitamin and
supplement manufacturers.”
CEOCFOinterviews: Can you tell us about the efficacy of
Chromium Picolinate?
Ms. Montgomery: “The efficacy of Chromium
Picolinate was established early on in some preliminary trials, which looked at its effect
on body composition: chromium helps to reduce body fat and improvelean body mass. While
those are attractive end points in this category, the actual mechanism of action that
supports chromium’s efficacy is its function as a co-factor for insulin. Our more
recent research and product development activities have been to understand that mechanism
and the potential effects of chromium’s role in enabling insulin to function better. We are looking at all of the end-points that are
affected by insulin resistance, and whether chromium can improve those health markers. This has
moved us closer to a disease treatment arena.
Chromium Picolinate was originally conceived as a cosmetic tool; we now look at it as a
major factor in over-all health. We see improved cholesterol levels, improved body
composition, better control of blood sugar levels and reduction in glycated hemoglobin
(hemoglobin molecules with sugar molecules chemically joined together) levels. Most of our
research is focused on people with Metabolic Syndrome or Type 2 diabetes, and we have seen
significant improvement with the administration of chromium.
As we have gone further down the research path, we have actually identified compounds that
combine with chromium for even better effects; the first of those to be developed is our
product Diachrome™, a combination of
chromium picolinate and biotin. Our goal is to develop it as an efficacious supplement,
not as an ingredient, for administration to people that have diabetes.”
CEOCFOinterviews: Many Biotech companies stay away from nutrition
and supplements because of the inability to obtain patents and make money, why does your
approach differ?
Ms. Montgomery: “We have patents and terrific margins. Our
investment in research is protected; it enables us to create a competitive advantage that
is sustainable. Our patent protection on these compounds, run any where from seven years
out to eighteen years out, with some patents newly issuing. We go down this research
pathway and look for potential synergism when identifying additional compounds that can be
combined with chromiumto design nutritional products that have even greater effects. We
are very fortunate to have a unique patent position in this arena. The combination of
clinical research and patent development expertise is what separates us from the
traditional nutrition products company.”
CEOCFOinterviews: Why is your work with chromium better than other
nutritional companies who are working with it?
Ms. Montgomery: “We own the patent on Chromium Picolinate and
it is the picolinate form of chromium that has been shown to have this strongest effects
on people with diabetes. Picolinate is a very strong mibneral chelator, based on a natural
constituent of picolinic acid. It is thought to be one of the body’s natural mineral chelating agents (the process of bonding
a mineral to an amino acid), which helps make minerals bio-available. When you look at the
body of evidence on chromium research, you see variable results across the broad spectrum
of indications and research programs. If you look at Chromium Picolinate’s clinical
research portfolio, you see 95% of the trials have had positive out-comes in the diabetes
arena; you see very consistent out-comes with regard to the degree of efficacy when you
look at important research endpoints. With chromium picolinate you see much less variability. There is clearly an advantage to the
picolinate form that overtime we have been able to prove again and again. Furthermore, we
have been able to take these new improvements and build upon them in our development of
these new compounds.”
CEOCFOinterviews: Will the advantages that the picolinate
form of chromium gives Nutrition 21, lead to a change in your business model?
Ms. Montgomery: “Yes, instead of just selling an
ingredient to other manufacturers who ultimately control the marketing and distribution of
products, we are moving to a business model where we actually going to be developing and
distributing our own finished product. We are going to be utilizing our own clinical
research expertise to augment the health claims that we can make with regard to these
products and to differentiate our products from the standard product that you may see on
the shelf.”
CEOCFOinterviews: When can we look for finished products on the
market?
Ms. Montgomery: “We are in the process of developing two
compounds, which are in the clinical development pathway now, and our estimates are that
within the next year to eighteen months, we will have finished product on the
market.”
CEOCFOinterviews: Will you have to go through an FDA approval
process?
Ms. Montgomery: “These products would qualify as dietary
supplements, however because of the strength of the clinical trials supporting them, we
are looking at some newly developed alternative approval processes that the FDA has put
into place for nutritional products, to decide whether they offer us any real advantage
over traditional dietary supplements. If we decide to utilize those, we will be working
with the FDA and ‘blazing a new
trail’.”
CEOCFOinterviews: Do you have a sales force and program in place
currently, or is that something you will have to develop over time?
Ms. Montgomery: “We have a sales force that currently markets
our ingredients. The only consumer products that we market today is a weight management
product, ‘Lite Bites®.’ This brand is a consumer- friendly line of bars, shakes
and supplements designed for weight loss that we sell through QVC. We are expanding that
line beyond QVC into traditional retail channels.
Our
QVC experience will be helpful as we begin to market and distribute other consumer
products, but we will be working outside of that channel.
Because of the highly correlated effect of these new chromium
compounds on disease states, we are expect to distribute directly to the populations
effected by the disease. We are working in cooperation with other disease management
companies that have an interest in nutritional therapy as an adjunct to what they are
already doing. We are not likely to leverage traditional retail distribution.”
CEOCFOinterviews: Is there anything new to look for coming out of
R&D?
Ms. Montgomery: “We talked about Diachrome™, which is a
product we are developing for people with diabetes. We
are also investigating a compound of Chromium Picolinate and CLA, which is an interesting
combination that has shown great promise for weight-loss applications, and in a very
unusual finding, has shown glucose up-take in the absence of insulin. There may be the
potential to develop chromium and CLA as a
treatment or a nutritional therapy for people who are insulin dependent. It may be proven
to reduce the requirement for insulin or may be refined as an insulin replacement. This is
a very promising an interesting area of development for us. However, we don’t see
these products coming to market for at least twelve months. The two consumer products that
we will bring to market are Diachrome™, and a branded form of our own Chromax
chromium picolinate as a finished product. In
addition we are developing a product yet to be named for the treatment of depression.
CEOCFOinterviews: Where are you in the development of your
depression treatment product?
Ms. Montgomery: “We have completed some very small but
meaningful studies at Duke University to ascertain the potential impact of chromium on the
depressed population; findings have been quite remarkable and we are actually in the
process of mapping out the research programs to confirm these initial findings. The
development pathway looks to be fairly short for this in that the efficacy of the product
was established fairly early. It appears that
we will not need to do long-term trials. We do need to expand the patient population
significantly in order to validate the initial findings; if positive, then a product
should be coming to market within the next twelve to eighteen months.
CEOCFOinterviews: Are some of your products applicable to heart
disease?
Ms. Montgomery: “There is an interesting over-lap between all
of these conditions. One of the most exciting things that we are doing as a company is
that we are actually looking at the health impact of restoring the body’s natural
chemical balance; both chromium and picolinate are natural compounds that are part of the
diet or the basic chemistry of the body. Chromium is essential for the proper function of
insulin; it was actually identified as an essential nutrient when it was discovered that
people being fed through parenteral nutrition actually developed symptoms of diabetes when
chromium was absent from the feeding formula.
We are working with compounds that are natural, and that have a significant health
impact over a broad range of functions. Chromium is tied to insulin function and insulin
is the hormone that controls the way the body processes and utilizes food as fuel. Insulin
therefore impacts every cell of the body in some way; if something goes wrong with that
process, the health consequences are broad ranging. Impaired
insulin function can manifest itself in many ways, from
cardio vascular disease to weight gain to diabetes to impaired vision and
vascular problems. If you can reverse that process, and restore or improve insulin
function and get better control of blood sugars, the health improvements can be significant. Many people wonder how chromium
picolinate is able to provide so many wonderful
benefits. Chromium by itself is not a magic pill, but by working in combination with
insulin, and it helps to maintain the healthy function of many body systems.
For many people, over time, the body’s
utilization of chromium becomes impaired. Sometimes, our
diet doesn’t provide enough chromium. Processed foods factor out
chromium as an essential mineral, therefore you get less in your diet. Modern farming
methods sometimes deplete the soil of minerals. Other
times the chemical imbalances in the body offset the body’s need for chromium.
Additionally, a diet high in simple carbohydrates increases the demand for chromium. We
have a lifestyle that requires the need for more chromium and a food supply that is
providing less of it. Nutrition 21 markets Chromax chromium picolinate as a cost effective
and simple solution to a broad range of health problems. Their health benefits aren’t
magic. We just help people supplement their body with an essential trace mineral that
restores natural chemical balance.”
CEOCFOinterviews: Will you continue to do business in ingredient
sales, and if so do you expect to see revenue growth in that area as well as with Lite
Bites®?
Ms. Montgomery: “We see both our ingredient sales and our
Lite-Bites® sales growing significantly over the next three to five years. We are not
abandoning those revenue opportunities, but building on them. In fact, we expect these businesses expanding and
benefiting from all of the other work we are doing with chromium in both diabetes and
depression. We also see the company
adding to our revenue opportunity with the introduction of new products.”
CEOCFOinterviews: With regard to your Lite Bites®, do you use any
artificial sweeteners?
Ms. Montgomery: “We do not use any sugar substitutes in
our Lite Bites® product. They contain no artificial sweeteners, which I think contributes
greatly to their taste. We do market a version of the Lite Bite’s bar, which provides
fewer sugars and more protein. Some people
prefer this reduced carbohydrate , but many consumers are long-term fans of the taste of
the original bar.
However, one of the most interesting things about this product is that despite its
fairly high carbohydrate content it has been proven to help people lose weight. We have
tested the Lite Bites® Program and the clinical
research is very compelling
In a double blind placebo-controlled trial, we have seen a positive effect weight loss in
a population that really was required to do nothing other than eat two additional bars in
combination with a USDA food pyramid diet. Therefore, unlike most products, which ask you
to reduce your calorie intake, eat less or substitute bars for meal, we asked people in
our trial to add our Lite Bites® as healthy snacks twice a day, and we’ve seen
terrific weight loss results, improvement in body composition and improvement in bone
density. Hence, it is clear that the vitamin and mineral supplementation is a key aspect
of the efficacy of this product and probably more important than even its nutritional
balance.”
CEOCFOinterviews: Is that what differentiates it from other
weight loss products on the market?
Ms. Montgomery: “Yes, very few of the bars on the market
today actually have a efficacious dose of any of the active nutritional compounds that are
available in the dietary supplement arena. That is happening more and more, but Lite
Bites® was one of the first products to actually incorporate efficacious ingredients as
part of a bar system.”
CEOCFOinterviews: How big is the market and where are you
currently positioned?
Ms. Montgomery: “We have a very small stake in
the overall weight loss market. QVC represents 3% of the distribution opportunity for
dietary supplements. We have a very
long-standing relationship with QVC, and are one of their m most enduring and successful
brands. Lite Bites is actually the second highest reorder product within
their system. However, with all of that success we have still only tapped into 3% of the
available opportunity for weight loss products. Therefore, we see a huge market potential
for Lite Bites® once we move into traditional retail and we will be doing that within the
next year as well.”
CEOCFOinterviews: How big is the market for your
Diachrome™ product?
Ms. Montgomery: “Approximately 16 million people have
type 2 diabetes in the United States. Our
first target group of those diabetics, would be those that are under disease management,
which represents about a half million patients. Obviously, supplementation with chromium
is part of a protocol that would be recommended for the rest of their lives and not a
compound that you would take for two weeks to fix the problem and then move on.
The administration of chromium take about 2 to 4 months to get maximum effect and then you
would need to maintain that over time to reach tissue saturation. If you stopped the
chromium, over a period about 2 to 4 months, you would slowly see that your blood sugar
levels would start to drift out of control. Therefore, Diachrome is a product that would be recommended for lifelong
supplementation, with a positive impact on cholesterol and blood sugar levels. The 500,000
population of managed diabetics is our entry into to this market and we expect it to grow
significantly over the next 3 to 5 years.
CEOCFOinterviews: Would people also continue to use your Lite
Bites® product throughout their lives?
Ms. Montgomery: “We certainly see a lot of cross
over use. It really depends on the consumers point of interest. Many people try the
product with the intent that they would like to lose weight, follow the protocol and do
lose weight. A lot of people just like the products.
They taste great and area healthy way to snack. People keep them in their car glove compartment,
or in their desk drawer at work. Instead of a candy bar, they reach for a Lite Bites®. Many people initially purchase the bars to lose
weight and then cross over to general long term use.”
CEOCFOinterviews: Has your product line been built through
R&D or acquisitions?
Ms. Montgomery: “We’ve grown through acquisition
but have applied our own pharmaceutical heritage to enhancing those acquisitions. AMBI
Inc., acquired the original ingredients business from Nutrition 21, Inc., a San Diego
based company. Lite Bites® was also an acquisition.
In the spring of 2001, we changed the company name to Nutrition 21.
Fortunately, patents and clinical research
supported most of the products developed by these acquired companies. Lite Bites®
hadn’t been clinically validated at the time of acquisition, but the anecdotal
evidence was good. We had confidence that we could actually clinically validate what we
had seen on a more casual basis.
CEOCFOinterviews: Do you have the cash and/or credit to
continue to build out your business?
Ms. Montgomery: “We have a great balance sheet,
with about 5 million dollars in the bank and no debt. We also have a credit line with
Fleet that remains untouched. We are cash flow positive and I think that we have the
wherewithal to get where we want to go under our own manpower.”
CEOCFOinterviews: In closing, what would you like to say to
current shareholder and potential investors?
Ms. Montgomery: “The important thing to recognize is
that the company has come through a transition; my objective has been to focus the
company’s efforts on the revenue opportunities that I thought were long-standing,
where we had the kind of competitive insulation that we have been talking about. Patience
has been required over the last eighteen months. It has taken time to build the business
foundation, but the clinical development program has been a worthwhile pursuit. The clinical results have been terrific and down
the road the company will be in a position to capitalize on this. I want to thank our current shareholders for their
patience and to tell people that if you are not familiar with the company, that this is a
great time to get involved. The future looks very promising.”
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