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Product Positioning in Nutrition and Health & Wellness: Bringing your Supplements, Medical
Foods and Pharmaceutical Drugs to MarketPresentation and Conference Call
Tuesday, May 24th, 2011 11am-12pm (PST)Agenda
Introduction Mike Dovbish, NCNGrant Ferrier, NCNSteve Allen, NCN
Legal Perspective Todd Harrison, Venable LLPQ&A Todd Harrison and AudienceConclusions and Upcoming Events Mike Dovbish, NCN
2May 24, 2011
Purpose of Presentation
• Introduce Nutrition Capital Network (NCN): Create context for upcoming events
• Discussion on product positioning for Supplements, Medical Foods and Pharmaceutical Drugs
3May 24, 2011
Nutrition Capital Network Mission• The mission of Nutrition Capital Network (NCN) is to:
– facilitate the financing and partnering process for small and medium-sized companies
– introduce investors to the next generation of successful brands and technologies in the nutrition, health & wellness, natural/organic and green product industries.
– facilitating capital flow for the betterment of business and society at large.
• NCN accomplishes this mission by:– creating a series of events and virtual tools to connect companies and
investors• Conference Calls
– Q1 “Building a Winning Team: Tips on Hiring and Team Building for the Entrepreneur”
– Q2 "Product Positioning in Nutrition and Health & Wellness: Bringing your Supplements, Medical Foods and Pharmaceutical Drugs to Market”
4May 24, 2011
NCN’s Focus
Companies in the nutrition and health & wellness industry across the value chain including the following sectors:
Dietary Supplements: VMS, H&B, Sports, LMRs
Ingredients, Medical Foods, Technology for OTC/Pharma
Natural & Organic Foods H&W Enabling Technology
Functional Foods Health & Fitness; Green Products
Healthy Foods, BFY Foods Weight Loss
N&O Personal Care, Cosmetics Household and Pet Products
5May 24, 2011
SponsorsLaw Firm Partner
Executive Search Partner
Branding & Strategy Partner
Government Trade Partner
Investment Banking Partner
NCN Investor Meetings are presented in association with
6May 24, 2011
NCN 2011 Cornerstone Investors
7May 24, 2011
NCN Historical Summary 43 of 89: 48% thru NCN 4; 66 of 180: 37% thru NCN 6
NCN Apps/Eval. Pool Selected Secured Funding
I 98 24 12II 84 22 13III 78 22 8IV 80 21 10
SSW Ing/Tech I 35 10 3V 78 20 5VI 85 19 6
SSW Ing/Tech II 35 8 2VII 90 21 4
8May 24, 2011
NCN Deal Flow SummaryApparel and textiles 3 <1%Functional Beverages 87 12%Functional Foods 63 9%Ingredients 129 18%Medical Foods 6 1%Natural & Organic Foods 162 22%Natural Personal Care & Household 82 11%Packaging 5 1%Retail & Service 50 7%Supplements 117 16%Technology 32 4%Total 736 100%
9May 24, 2011
NCN 2011 Calendar NCN Seminar at Expo East - Baltimore• September 21-24, 2011
NCN at Supply Side West: Las Vegas• October 11, 2011: 8-10 Companies
http://www.nutritioncapital.com/NCN_at_SupplySide_October_2010
NCN IX Fall Meeting, Los Angeles• November 14-15, 2011: 20-22 Companieshttp://www.nutritioncapital.com/NCN_IX_Fall_2011
NCN X Spring East Coast Meeting• May 2012: 20-22 Companies
10May 24, 2011
Nutrition Capital Network Selection Criteria
NCN and members of our screening committee use the following basic criteria to evaluate potential presenting companies, and believes that similar criteria would be used by any experienced investor to screen business ventures.
Novelty and Unique Position• A demonstrated point of differentiation• New company or concept for investors; not ‘shopped around’ too much• Potential for leadership in a defined sub-segment, channel or niche of
some size
11May 24, 2011
Nutrition Capital Network Selection Criteria (cont’d)
Insulation• Protectability of product or service or technology; defense
against copycats• Intellectual property: trademarks and patents
Economic Potential• Size and growth rate• Scalability; potential for economies of scale• Profitability; Demonstrated gross margins• Exit potential: A variety of interested parties
12May 24, 2011
Nutrition Capital Network Selection Criteria (cont’d)
The Management Team• Pertinent experience of executives: health & wellness, medical, startups,
CPG companies, a specific distribution channel and/or marketing & sales
• Demonstrated track record in early stage or returning capital• Surrounding team: investors, partners, marketing & distribution
alliances, legal team• Star power and charisma; name recognition
Tangibles • Good branding or brand name, good quality & taste, unique packaging
or presentation
Intangibles• The "WOW" factor; head turning potential
13May 24, 2011
NCN Results
• Evaluated 832 companies since Oct. 2007 • Selected 200 companies to present at 11
NCN events – 8 dedicated meetings and 3 smaller satellite events
• 41% of companies (61/150) that presented up to NCN 6 in April 2010 had received funding or completed a transaction as of April 2011
14May 24, 2011
U.S. Condition-Specific Supplement, OTC, Rx Sales & Growth in 2009 ($bil)
Source: Nutrition Business Journal
Supplement Supplement OTC OTC Rx RxCondition Sales Growth Sales Growth Sales GrowthGeneral Health $4,340 4% n/a n/a n/a n/aCold/Flu/Immune $1,940 6% $5,770 2% $8,220 16%Sports/Energy/Weight Loss $7,070 3% $560 -12% $150 -11%Brain Health/Mental Acuity $510 10% n/a n/a $3,970 17%Insomnia $260 12% $330 4% $2,100 -3%Mood/Depression $430 11% n/a n/a $26,630 1%Menopause $400 4% $120 0% $2,210 5%Heart Health $1,880 8% $470 2% $18,910 4%Joint Health $1,600 0% $520 -4% $11,230 14%Sexual Health $480 -1% $90 15% $1,960 12%Bone Health $1,670 8% n/a n/a $4,440 -11%Gastrointestinal Health $1,090 11% $4,520 1% $13,640 -1%Diabetes $970 3% n/a n/a $14,780 17%Vision Health $340 6% $540 3% $5,730 13%Hair/Skin/Nails $520 10% $2,830 0% $2,430 37%Anti-Cancer $1,220 0% $980 3% $8,010 9%Anti-Aging $300 3% n/a n/a n/a n/aSum of 17 Conditions $25,000 5% $16,740 1% $124,430 7%Others $1,880 30% $1,800 2% $175,870 4%Total $26,880 6% $18,540 1% $300,300 5%
15May 24, 2011
Todd Harrison
Todd A. Harrison, Partner: Washington, DC Office. T 202.344.4724 F 202.344.8300 [email protected]
AREAS OF PRACTICE• Advertising and Marketing• Advertising and Marketing Litigation• RegulatoryINDUSTRIES• Consumer Products and Services• Drugs, Medical Devices and Biologics• Dietary Supplements, Cosmetics and Functional FoodsBAR ADMISSIONS• District of Columbia• MarylandEDUCATION• J.D., highest honor, University of Tulsa College of Law, 1993• Order of the Curule Chair• B.S., magna cum laude, University of Houston-Clear Lake, 1989
16May 24, 2011
Todd HarrisonTodd Harrison focuses his practice on Federal Food and Drug Administration (FDA), United States
Department of Agriculture’s Food Safety and Inspection Service (FSIS)/Animal and Plant Health Inspection Service (APHIS)/Agricultural Marketing Service (AMS), Federal Trade Commission (FTC), and the Drug Enforcement Administration (DEA), as well as other federal, state, and international consumer protection agencies governing rules and regulations related to drugs, foods, dietary supplements, homeopathic remedies, medical devices, medical foods and cosmetics. Mr. Harrison works extensively in the areas of food and dietary supplement safety, labeling and advertising claims. He drafts opinion letters regarding the status of food ingredients in the United States and assisted in the preparation of food additive petitions, GRAS notifications, and new dietary ingredient notifications. He also assists companies in developing self-determined GRAS position for food ingredients.
Mr. Harrison advises clients on issues related to FDA and FSIS’s labeling requirements a well as on organic products and genetically modified organisms. Additionally, he advises clients on international food issues.
Mr. Harrison has assisted companies on important FDA, FSIS, APHIS compliance issues, including HAACP, good manufacturing practice, product recalls vs. market withdrawals, inspections, warning letters, complying with FDA’s and FSIS’s standards of identities, importing meat and poultry products into the United States, warning letters, and record keeping.
Mr. Harrison has been involved extensively on issues related to the marketing of foods and dietary supplements, including health claims, qualified health claims, structure/function claims, and nutrient content claims. He has developed strategies for companies to communicate information about their products without running afoul of FDA, FSIS and FTC regulatory requirements. He also has a successful track record of defending against U.S. FTC advertising complaints, enforcement actions and prosecutions, and defending against competitor challenges in court and other forums.
17May 24, 2011
Todd Harrison
PUBLICATIONS• December 2010, Congress Passes S. 3386 Restore Online Shoppers’ Confidence Act, Client Alerts• September 2007, A Guide to the New Dietary Supplement GMPs: Reviewing the details, nuances and
potential impact of the new rule• April 2007, Consumer Products Regulatory Report, Q1 2007• July 2006, Consumer Products Regulatory Report, July 2006• June 24, 2006, Pet Supplements Primer, Nutraceuticals World• April 24, 2006, Revisiting Medical Foods, Nutraceuticals World• March 2006, Consumer Products Regulatory Report, March 2006• February 24, 2006, Food Allergy Labeling is Here!, Nutraceuticals World
SPEAKING ENGAGEMENTSMr. Harrison is a frequent speaker on regulatory law as it relates to foods, dietary supplements
and functional foods.• May 24, 2011, "Bringing your Supplements, Medical Foods and Pharmaceutical Drugs to Market" for the
Nutrition Capital Network (NCN)• May 3, 2011 - May 5, 2011, Response Expo 2011• March 31, 2011 - April 1, 2011, ACI's Food & Beverage Marketing & Advertising Conference• March 12, 2011, Natural Products Expo West 2011• February 28, 2011 - March 2, 2011, ERA's Great Ideas Summit• July 21, 2010, "State of the Industry" at the Nutritional Business Journal Summit 2010
18May 24, 2011
Key Definitions
Key Definitions
19May 24, 2011
Definition of a Medical Food
• A Medical Food is defined as a food – formulated to be consumed or administered enterally under the
supervision of a physician, – that is intended for the specific dietary management of a
disease or condition,– for which distinctive nutritional requirements, based on
recognized scientific principles, have been established by medical evaluation
• Narrowly construed – FDA warning letters have indicated that allergies, arthritis,
asthma, cardiovascular disease, fibromyalgia, chronic fatigue syndrome, failure to thrive, prenatal vitamins, autoimmune disorders and diabetes are not conditions with distinctive nutritional requirements
20May 24, 2011
Definition of a Dietary Supplement
• A Dietary Supplement is defined as a product– that is intended to supplement the diet, which contains one or
more of the following dietary ingredients: a vitamin, a mineral, an herb or other botanical, an amino acid, a dietary substance to supplement the diet by increasing the total daily intake, or a concentrate, metabolite, constituent, extract, or combination of these ingredients.
– ingested in pill, capsule, tablet, or liquid form. – not represented for use as a conventional food or as the sole
item of a meal or diet.
21May 24, 2011
Key Requirements for Medical Foods
Key Requirements for Medical Foods
22May 24, 2011
Specifically Formulated and Processed
• A medical food is specifically formulated and processed (as opposed to a naturally-occurring food used in its natural state) for the partial or exclusive feeding of a patient by oral intake or tube.
23May 24, 2011
Dietary Management of a Patient
• Medical food is intended for the dietary management of a patient who has – limited or impaired capacity to ingest, digest, absorb, or
metabolize ordinary foodstuffs or certain nutrients because of therapeutic or chronic medical needs, or
– other special medically-determined nutrient requirements that cannot be addressed through modification of the normal diet alone Ganeden Biotech 2006 Warning Letter – Psoriasis, chronic
constipation, arthritis, Crohn’s Disease and Colitis, and IBS do not have distinct nutrient requirements
24May 24, 2011
Unique Nutritional Requirements
• Medical foods provide nutritional support specifically modified for the management of the unique nutrient needs that result from a specific disease or condition, as determined by medical evaluation– Bioenergy Corvalen Warning Letter 2010 – No distinctive
nutrient need for patients with fibromyalgia, chronic fatigue syndrome, or cardiovascular disease
– Nestle’s Boost Kid Essential Warning Letter 2009 – No distinctive nutrient need for the medical condition “failure to thrive”
– Efficas Warning Letter 2007 – No distinctive nutrient need for individuals suffering from allergies or asthma
– Metagenics Warning Letter 2003 – No distinctive nutrient requirements for type 2 diabetes, arthritis, psoriasis, eczema, chronic fatigue, and migraine headaches.
25May 24, 2011
Medical Supervision
• It is intended for use under medical supervision• Medical foods are intended only for patients receiving
active and ongoing medical supervision, wherein the patient requires medical care on a recurring basis for, among other things, instructions on the use of the medical food
26May 24, 2011
Path to Market for Medical Foods
Path to Market for Medical Foods
27May 24, 2011
Barrier to Entry is Moderate
• Does not require FDA approval, but– FDA views this category as being very narrow– FDA will require all ingredients to be GRAS-E– The minimum efficacy requirement is the Significant
Scientific Agreement (SSA) standard– Distribution Channels are limited– Importing, without prior, consultation with FDA, is
done at the company’s own peril– FDA may not believe a pill is an appropriate delivery
vehicle.
28May 24, 2011
Unique Nutritional Need Requirement
• Scientific dossier must be developed to demonstrate that a specific disease or medical condition has unique nutritional needs that cannot be otherwise met through simple modification to the diet.– The nutritional need requirement will require at a
minimum Significant Scientific Agreement. It is insufficient to state the product works
nutritionally if the scientific literature does not show that the nutrients you are providing are necessary.– Cannot use the Medical Food category to
circumvent the New Drug Approval process
29May 24, 2011
Safety
• Medical foods, like “conventional” food products, must contain only ingredients that are either GRAS for use in food or approved as food additives by FDA. – The ingredients must be generally recognized,
among qualified experts, as having been adequately shown to be safe under the conditions of intended use. May require at least one safety study in the
intended patient population.
30May 24, 2011
Medical Food - Effectiveness
• At a minimum, FDA would require Significant Scientific Agreement to establish the effectiveness of a medical food. – In an advanced notice of proposed rulemaking (withdrawn),
FDA indicated that the scientific evidence is likely somewhere between the SSA standard and the standard for a new drug approval.
– The FDA has indicated its position on this issue by stating, “it is essential that the claims made for such a product present an accurate interpretation of the scientific evidence concerning the usefulness of that product or specific formulation…, [and]…a strong standard of substantiation would be one that requires that all pertinent data be considered in the formulation of the product and in the development of any claims about its use.” FDA Advanced Notice of Proposed Rulemaking, 61 Fed. Reg. 60661, 60669-70 (Nov. 29, 1996).
31May 24, 2011
Marketing Claims
• Medical Foods can be marketed with claims related to the dietary management of a disease.– This product is intended for the dietary management
of individuals with Type 2 diabetes
32May 24, 2011
Marketing Channel
• The Orphan Drug Act does not restrict the marketing channel that Medical Foods may be marketed.– FDA takes a limited view of the marketing channel
Hospitals, pharmacies (behind the counter), and physician offices, etc.
FDA does not believe that the products should be mass marketed– Are Glucerna and Boost Glucose Control medical
foods, foods for special dietary use, or hybrids? Labeled to be taken under the supervision of a
medical practitioner Mass marketed Dietary uniqueness
33May 24, 2011
Examples of Medical Foods Presently Marketed
• Axona® - A prescription medical food that is marketed for the dietary management of Alzheimer’s.
• GlycemX™ 360 – A medical food that is marketed for the dietary management of diabetes.
• VSL#3® - A probiotic medical food marketed for the treatment of IBS, ulcerative colitis, etc.
• Limbrel®500 – A medical food marketed for the treatment of osteoarthritis.
34May 24, 2011
Dietary Supplement Core Concepts
Dietary Supplement Core Concepts
35May 24, 2011
SAFETY
• Under DSHEA, a supplement or dietary ingredient is unsafe if:– It presents a significant or unreasonable risk of
illness or injury, under the conditions of use recommended or suggested in labeling, or under ordinary conditions of use, or
– It is a new dietary ingredient for which there is inadequate information to provide assurance that it does not present a significant or unreasonable risk of illness or injury.
36May 24, 2011
New Dietary Ingredients
• A “new dietary ingredient” is an ingredient that was not marketed in the United States before October 15, 1994, and does not include any dietary ingredient which was marketed in the United States before October 15, 1994.
37May 24, 2011
New Dietary Ingredients
• Questions & Answers About New Dietary Ingredients:
Q1: What if I know that an ingredient was marketed before October 15, 1994, but do not have evidence? Must I submit an NDI notification?
Q2: My ingredient is an extract of a food that was present in the food supply before October 15, 1994. Do I need to submit an NDI notification?
Q3: My ingredient was a component of food in the food supply in chemically altered form. Do I need a NDI notification?
38May 24, 2011
Dietary Supplement Claims
• Health Claims• Qualified Health Claims• Nutrient Content Claims• Structure / Function Claims
39May 24, 2011
Dietary Supplement Claims:30-Day Notification
• No more than thirty (30) days after a supplement bearing a structure/function claim is marketed, the manufacturer, packer, or distributor of the supplement must notify the FDA Office of Nutritional Products, Labeling and Dietary Supplements.
40May 24, 2011
Dietary Supplement Claims:Disclaimer
• The FD&C Act requires the following disclaimer to appear in connection with a structure/function claim:
“This/these claim(s) has/have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease.”
Statement must also…Be at least 6 point font size,Be bold,Be entirely enclosed inside a box,Be listed by itself preferably on the same panel as claim or include a link to
the claim.
41May 24, 2011
Dietary Supplement Claims:Substantiation
• In considering the number and type of studies required to substantiate a claim, advertisers should consider:
1. The meaning(s) of the claims being made, express and implied;
2. The relationship of the evidence to the claim;
3. The quality of the evidence; and
4. The totality of the evidence.
5. Accepted norms in the relevant research field.
42May 24, 2011
Drug, Medical Food, or Dietary Supplement: The Pros and Cons of Each Approach
Drug, Medical Food, or Dietary Supplement:
The Pros and Cons of Each Approach
43May 24, 2011
Drug, Medical Food, or Dietary Supplement: The Pros and Cons of Each Approach
YourProduct
Medical Food
Dietary Management of a Disease
Food Additive
Intended to become component of or affect characteristics of food
GRAS
Intended to become component of or affect characteristics of food
Dietary Supplement
Intended to supplement diet
Drug
Intended to diagnose, cure,
mitigate or treat disease
44May 24, 2011
Drug Pros
• Pros of marketing drugs that have gone through FDA’s approval process– Make express disease claims– Exclusivity during initial marketing phase regardless
of patent consideration– Higher Price Point– Prescription drugs covered by insurance plans
45May 24, 2011
Drug Cons
• Cons of marketing drugs that have gone through FDA’s approval process– Extensive amount of R&D time– Drug approval process takes years– Costs will most likely be in the tens of millions, if not
higher– No guarantee of approval – Significant regulatory oversight
46May 24, 2011
Medical Foods Pros
• Pros of marketing a product as a medical food– Lower barrier to market entry– FDA premarket approval not required– Express disease management claims – Less costly to manufacture– Less regulatory oversight– FDA objects may be able to rebrand as a dietary
supplement or conventional food with appropriate structure/function claims
47May 24, 2011
Medical Foods Cons
• Cons of marketing a product as a medical food– Extensive amount of R&D time– Requires at least Significant Scientific Agreement– Clinical studies are costly– Category narrowly construed– Limited marketing channels– Lower barrier of entry– FDA may disagree that the product is appropriately
marketed as a medical food
48May 24, 2011
Dietary Supplement Pros
• Pros of marketing an ingredient as a food or dietary supplement– Lowest barrier to market entry– No FDA premarket approval required – NDI is a
notification, not an approval process – Interesting issue whether FDA can deny a notification
– No restrictions on marketing channels– U.S. consumers understand the implied meaning of
structure/function claims– Less costly to manufacture– Less regulatory oversight
49May 24, 2011
Dietary Supplement Cons
• Cons of marketing an ingredient as a food or dietary supplement– Limited to structure/function claims or FDA-permitted
health claims– Generally not covered by insurance– Generally no barriers to entry by competitors
50May 24, 2011
Q & A
At this point, Steve Allen will kick-off Q&A followed by the conference call moderator to give instructions to the audience for Q&A.
51May 24, 2011
NCN 2011 Calendar NCN Seminar at Expo East - Baltimore• September 21-24, 2011
NCN at Supply Side West: Las Vegas• October 11, 2011: 8-10 Companies
http://www.nutritioncapital.com/NCN_at_SupplySide_October_2010
NCN IX Fall Meeting, Los Angeles• November 14-15, 2011: 20-22 Companieshttp://www.nutritioncapital.com/NCN_IX_Fall_2011
NCN X Spring East Coast Meeting• May 2012: 20-22 Companies
THANKS FOR JOINING US
We Look Forward To Seeing You at Supplyside West and NCN IX!