November 20, 2013
Plandaí to Provide New Formula in Diet Industry Profit Quest
Obesity is now becoming a worldwide problem that is no longer confined solely to the United States. Finally classified as a disease by the AMA earlier this year, obesity prevalence has increased 40% in OECD industrialized nations, and is forecast to be present in over half of the adult American population by 2030 unless a different course of action is taken by a vast majority of people or new scientific breakthroughs make it easier to fight this disease. The weight loss market has been disappointing recently with many high profile weight loss companies failing to deliver from an overall revenue and profit perspective as the products have not delivered on their claims, opening the door for new technology. Building on this premise, Plandaí Biotechnology, Inc. (OTCQB – PLPL - $0.49 – Spec Buy) is an innovative development stage company making a foray into the green tea extracts market with its proprietary Phytofare™ Catechin Complex.
One of the many benefits of this product will be to aid in the fight against the obesity, as several studies have demonstrated that green tea catechins are effective at inducing weight loss, especially when combined with caffeine. The process by which this happens is called “thermogenesis,” which is the body’s ability to create heat. Stimulating thermogenesis forces the body to burn its energy reserves which, once depleted, burns stored fat.
With all of the negative carryover effects of obesity including health issues like heart disease, diabetes, and musculoskeletal disorders that result from obesity one would think that weight loss drugs, diet supplements, and related food products would be a booming industry. This is not the case. Weak economies and stagnant wages have decreased demand for specialized supplements or diets that are usually relatively expensive. Swiss giant food conglomerate Nestle has agreed to divest its Jenny Craig business to North Castle Partners.
Additionally, Bernstein Research estimates Slim-Fast had 2012 sales of 300 million Euros ($402 million), 34 percent lower than when Unilever agreed to buy it in 2000 for $2.3 billion, which could force Unilever to sell the brand. Finally, safety issues continue to present a significant hurdle for diet pills related to the significant cost. Sanofi's (NYSE – SNY) Acomplia was taken off markets in Europe in 2008 after being linked to suicidal thoughts, and Abbott's(NYSE – ABT) Meridia was pulled in 2010 after being linked to heart problems.
Still, some segments are screaming ahead. Thomson Reuters Pharma reports consensus analysts’ forecast may grow from $300 million currently to $3.8 billion by 2018. Additionally, the retail market for meal replacement products like Slim-Fast bars and Herbalife (NYSE – HLF) shakes grew 40% to nearly $7.75 billion from 2008 to 2012 worldwide according Euromonitor.
The facts above offer a slightly conflicting story related to the diet supplement and weight loss industry. While the overall rise in obesity seems somewhat inevitable, the growing market for the healthy consumer also appears to be an opportunity for innovative products and technology. Plandaí is well positioned in this segment and results from its weight loss study should confirm this early sometime in 2014.
While green tea catechins and caffeine are not weight loss inducers, their effectiveness thus far has been limited for two related main reasons. First, catechins have poor bioavailability, which means they are not absorbed well in the blood stream. So, in order to get an effective dosage, massive quantities have to be ingested. Which leads to the second problem: heretofore, the amount of catechins and caffeine necessary to achieve meaningful weight loss has induced nausea in test patients. Plandaí overcomes both of these problems.
First, the bioavailability of Plandaí product is far superior to any other product on the market , which should produce better results related to benefits like weight loss. Moreover, the Phytofare™ Catechin Complex is comprised of more than just the EGCG catechin, which should pack an even greater punch through its absorption and weight loss effect. Second, Plandaí entraps its Phytofare™ in Pheroid—a long-chain fatty acid that protects the molecules as they pass through the digestive tract. This means that larger dosages of the active ingredients can be ingested without producing nausea. Plandaí plans to test the effects of Phytofare™ Catechin Complex on 90 subjects, including a placebo group, over the course of three months in a human clinical trial.
Measurements will track overall weight loss, changes in body fat percentages and mood. Phytofare™ should be able to demonstrate significant health benefits, including weight loss, owing to its higher absorption levels. Plandaí expects that these results will provide a catalyst as it enters the weight loss and diet supplement market with a superior product that will appeal health conscious consumers and impact the top line growth in a beneficial way.
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Senior Analyst: Robert Goldman
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