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Case study: BioActives, Inc.

BUSINESS DESCRIPTION: BioActives, Inc. is a developer of value added, proprietary ingredients and processes for nutraceuticals--with specific experience and focus going toward enhancing the bioavailability of hydrophobic ingredients, such as carotenoids like lutein and zeaxanthin.

THEME: As a small developing company built on science, it is necessary for BioActives to continue to develop, increase the visibility of and find suitable outlets for its technology.

BACKGROUND: BioActives, Worcester, MA, was established in 1999 to provide value added ingredient solutions to the nutrition industry. The company is privately held and maintains laboratory facilities in Massachusetts and a captive manufacturing facility in India that is able to supply pre-commercialization quantities of ingredients. The company has six patents granted or pending related to enhancing the bioavailability of hydrophobic ingredients. Arising from this technology is MicroActives, which is the company's registered brand of ingredient solutions, including carotenoids such as lutein and zeaxanthin, among others, which are made more bioavailable through proprietary complexation with cyclodextrins or manipulation of particle sizes. Additionally, BioActives markets a celery seed extract, which is 85% pthalides and is positioned for the anti-inflammatory market. In the very near future, a national eye care company will be introducing a product containing the company's lutein 20% oil dispersion. Clinical evidence exists to support BioActives' complexed lutein as the most bioavailable on the market. In addition, its process prevents the broad variation of lutein absorption found among different subjects--effectively normalizing uptake and ensuring that it is bioavailable, a serious concern for carotenoids. BioActives works with dietary supplement, cosmetic, food and oral care companies to assist in the creation of new product lines--helping the consumer packaged goods (CPG) manufacturer differentiate through enhancing bioavailability.

SITUATION ASSESSMENT: BioActives could be said to draw competition from a wide variety of arenas, including value added ingredient suppliers such as BASF and DSM Nutritional Products, Inc., specialized ingredient players such as Kemin and Pharmachem, and contract technology providers like Balchem. Apart from competition, time limitations and risk aversion among large CPG manufacturers add further challenges to a small developing company marketing ideas that result in the creation of new product lines. BioActives views its market differentiation arising from a combination of its technology and strategic approach. Despite its IP (intellectual property), clinical validation and expertise, however, BioActives is not in a position to communicate directly with customers and thereby create demand for its solutions. Additionally, a company of its size has challenges in carving out a niche for itself against established competition. In an effort to be a preferred ingredient solution provider in the nutrition industry, BioActives is placing attention on three key strategic areas: (1) Securing strategic partnerships in the industry offering not only value added ingredients but also product development; (2) Continuing to build upon its technology, increasing its offerings and patents; and (3) Communicating its differentiation as broadly as possible--showing CPG manufacturers the value of its technology.

OPPORTUNITIES: As the level of understanding and attention regarding the technical aspects of ingredients continues to increase, the need for further innovation is also garnering enhanced interest. Utilizing microencapsulation and particle size technology to boost bioavailability increases the efficacy of ingredients. The opportunity for a company such as BioActives lies in its ability to provide solutions to CPG manufacturers or ingredient suppliers that create product differentiation, increase efficacy and provide consistent results. BioActives is in a position to creatively and flexibly respond to the product line needs of partners searching for such long-term solutions.

LESSONS LEARNED: BioActives demonstrates the challenges of being a small science-based company positioned around technical innovation. Looking at its position can help elucidate some important factors in strategy. (1) It is important for BioActives to clearly communicate its offerings and value proposition to CPG manufacturers. Much more complicated than acting as an ingredient supplier, BioActives must demonstrate the economic feasibility and product potential of introducing product lines based around enhanced bioavailability. (2) As a company focused on further developing its research base, BioActives must maximize its current resources, while continuing to be an innovative technology leader. The implications here include not only effectively managing internal resources, but also aligning with the appropriate strategic partners and customers. Because BioActives focuses on developing corporate relationships, which are more akin to an outsourced R & D / product development arm than a standard customer-client interaction, attention to the partnering approach is critical. (3) BioActives must allow its products and solutions to "rise above the noise" of competing, substitute and imitation products. Effective IP protection and clinical substantiation are of paramount importance to its science-based approach.

Information in this column was provided by Tom Clough, founder of Health Strategy Consulting, Providence, RI. He can be reached at 401-270-0760 or
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Publication:Nutraceuticals World
Article Type:Company Profile
Date:Oct 1, 2004
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