Nutraceuticals may seem staid, but they present a surprising opportunity to life science investors … one worth looking into.
Compared to CRISPR-Cas9 gene-splicing and immuno-oncology, nutraceuticals can seem like the tame side of biotech investing: food products just don’t have the glamour of those exciting new technologies and approaches. But that doesn’t mean you should count them out. Nutraceuticals may seem staid, but they present a surprising opportunity to life science investors … one worth looking into.
What are nutraceuticals?
First things first: how does the industry define ‘nutraceuticals?’
Broadly speaking, the term refers to a product derived from food, one that has health benefits that go beyond basic nutrition. That means fish oil pills, fiber supplements or probiotic yogurt can all be considered nutraceuticals.
So are products like HempOmega, a powder Naturally Splendid (TSXV:NSP) created from hemp seed oil. It’s a way for manufacturers to add oil—and omega fatty acids—to other products.
Then there are companies like Herbalife (NYSE:HLF), which focuses on weight-management meals and protein powder. Or Cyanotech (NASDAQ:CYAN): they make dietary supplements from microalgae. Laguna Blends (OTCMKTS:LAGBF, CSE:LAG, FRA:LB6A) actually created an instant coffee infused with whey and hemp protein!
Clearly, this field is wide-ranging. But diverse as nutraceuticals are, it’s worth noting that most focus on prevention, rather than treatment—one major difference between them and other biotech products.
Benefits of nutraceutical investing
In fact, that may be considered the first benefit of nutraceutical investing. Because this industry tends to focus on prevention, the consumer base can be much wider: 29.1 million Americans have diabetes, for example, but some 86 million are at risk. All of them may benefit from a nutraceutical that helps regulate blood sugar.
Of course, not all 86 million know they’re prediabetic, much less are prepared to take preventative steps. But as interest in personal wellness increases and awareness campaigns continue, this could change.
Indeed, it’s this marked increase in health consciousness—as well as an interest in alternative medicines—that has, in part, driven nutraceutical growth. A 2015 report from Transparency Market Research projects the global industry to reach $US278 billion by 2021. That’s a compound annual growth rate of 7.3 percent.
Another point in this industry’s favor? Nutraceuticals may not be as stringently regulated as pharmaceutical drugs or medical devices—which means they can get to market quicker. In the United States, for example, it is the manufacturer’s responsibility to ensure a nutraceutical is safe. They do not have to obtain FDA approval before putting their product on the shelves, unless it contains a brand new food additive.
Drawbacks of nutraceutical investing
That’s not to say nutraceuticals are totally unregulated. In Australia and Canada, for example, they’re treated more like new drugs—and the review process takes time. And in the United States, the FDA still has the power to pull any nutraceutical product off the shelf, should they discover they discover it’s been mislabeled or misrepresented.
Nutraceuticals can also be very trendy—just consider the way certain ‘superfoods’ fall in and out of favor. This, of course, may create some volatility in the market.
Nutraceuticals tend to be more popular with those who have ample disposable income. Consumers may see them as a ‘nice to have,’ rather than necessary—a clear difference from how we view many pharmaceuticals or medical devices.
The fact that some insurance companies might not cover nutraceuticals further limits the customer base.
Consider nutraceutical investing as a way to further diversify your life science stock holdings. Although the sector doesn’t receive as much media coverage as biotech or drug discovery, it still appears hale and hearty—that is, growing. As the global population becomes more health-conscious, that trend might continue … and savvy investors could cash in.
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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Naturally Splendid and Laguna Blends are clients of the Investing News Network. This article is not paid-for content.