Nestlé raises its bet on potential $ 10 b health business

Tuesday, 20 October 2015 00:01 -     - {{hitsCtrl.values.hits}}

  • Nestlé Health Science sees pipeline and geographic growth
  • Unit CEO says accelerating hunt for external innovation
  • «Constructive» discussions with FDA on nutritional therapy

VEVEY, Switzerland (Reuters): Nestlé, famous for its coffee and chocolate, is stepping up investment in nutritional therapy, a business it believes will eventually generate annual sales of 10 billion Swiss francs ($10.5 billion).

Greg Behar, Chief Executive of Nestlé Health Science, told Reuters that the unit formed in 2011 already had revenue of more than 2 billion francs and there were major opportunities both in the new-product pipeline and in geographic expansion.

«Most of the emerging markets are offering amazing growth opportunities,» he said.

Behar, who worked for drugmakers Novartis and Boehringer Ingelheim before heading the new Nestlé unit, is forging a new kind business that is midway between food and pharmaceuticals.

The goal is to find novel ways to treat and prevent different types of diseases using nutritional approaches, from gastrointestinal problems to Alzheimer›s.

It is a bold move by the world›s largest packaged food company and requires Nestlé to engage in discussions with regulators such as the US Food and Drug Administration (FDA), which Behar said were going well.

«The FDA wants to bring innovation to the market. They see the health value of our products and we›re having very constructive discussions with them,» he said in an interview after Nestlé reported nine-months results.

«They see us as a partner that can help shape this area and this regulatory framework.»

Currently, Nestlé Health Science has around 40 different projects underway and Behar said: «We think we can do more.»

He believes there is a clear opportunity to fill a gap between the traditional pharmaceutical and food industries, given ageing populations around the world and spiralling cases of lifestyle diseases.


Strategic hedge

Strategically, the shift towards health offers Nestlé a hedge against slowing growth in packaged foods by opening up a profitable new area. It is also a counter to crackdowns on unhealthy foods blamed for obesity and other lifestyle problems.

At present, Nestlé Health Science margins are in line with the group average but Behar said his vision was for the division to be “significantly accretive” in the long term as its profit margins increase to above the group average.

Nestlé has recently been stepping up spending in the space through acquisitions and collaborations. Last week it also announced plans to invest $70 million in a new health science research hub and US headquarters in New Jersey.

“We will continue accelerating our external innovation,” Behar said, adding that deals could be both big and small, while the timing of acquisitions would depend on opportunities.

Earlier this year, Nestlé invested $65 million in Seres Health, a US start-up company that specialises in restoring the “microbiome”, or healthy gut bacteria, and which is developing an experimental treatment for clostridium difficile infection. It has also acquired or invested in companies working on metabolic disorders, gastroenterology, oncology and Alzheimer’s disease. Last month it signed a deal with Swiss biotech firm AC Immune to develop a simple diagnostic test for Alzheimer’s, on the basis that early diagnosis will be critical if targeted nutritional approaches are used in fighting the memory-robbing condition.

As part of its drive to establish itself as science leader in the field, Nestlé is hosting a symposium next week in Lausanne on cognition and brain health, with academic speakers from prominent institutions such as the Massachusetts Institute of Technology and Sweden’s Karolinska Institute.