by KSS, MD, PhD, and Allan Lee, Managing Editor
The following conversation between ChromaDex entrepreneur Frank L. Jaksch, Jr, co-founder and executive chairman of that company, Dr. KSS and Allan Lee took place in November, 2018, at the annual Torrey Pines Capital Investor Conference, San Diego, California. Torrey Pines Capital are a prominent Southern Californian firm providing financial services to clients and investor relations for small-cap firms, many in biotech and the supplement/nutriceuticals industries.
KSS -So you’re the first product I’ve come across that muscularly has something intellectual to back it up. It’s very commendable. I’m sure you’ll agree by playing that to the hilt, by marketing your supplement the right way. There’s a lot of nutrient stupidity out there….it’s astounding really….People read an irresponsible paper ascribing longer life in yeast to a substance, and they go all wobbly in their fifties and start buying into nonsense. But here's ChromaDex ($CDXC ), a nutrient company with a conscience...and a brain.
AL - Wow, seems like you guys have a lot of sales already, like $8 million?
FJ – Yes that was last quarter and that’s really just the start of where we are going. I’ll give you some background…our legacy is in science so the DNA of the company is built on a chemistry platform and that’s how we found nicotinamide riboside, the precursor to NAD [nicotinamide adenine dinucleotide]. What we are today is an NAD company, so our entire platform is now focused on the opportunity we have with nicotinamide riboside as an effective NAD precursor.
And you're right, the largest market in this space are for compound vitamins, amino acids, things that are well understood mechanistically and things that will meet or have proven to meet nutrient deficiency. Vitamins are probably the biggest in that category. So if you look at omega 3 fatty acids as an example, there are drugs that are omega 3 fatty acids; as a matter of fact Amarin’s latest improvement…. well we don’t want to talk about THAT situation but the point is if you have a omega 3 fatty acid deficiency in your diet, deficiency can enable a host of different issues.
Vitamin D is another one coming onto the market right now and those vitamins by definition are the largest market. At ChromaDex we happen to capture the latest and greatest nutrient deficiency: that’s the nutrient deficiency associated with aging, which is the decline of NAD. NAD is very well known, it’s not new by any means and it's central to whole cellular energy metabolism story. Without NAD you don’t get production of ATP. Without ATP everything goes wrong, of course.
What wasn’t known was the importance of NAD beyond the ATP story and this is where things start to get really interesting for us. What wasn’t known was that most of cellular repair enzymes, DNA repair points, the sirtuins, SARM 1, PARP.... there’s a host of these essential repair enzymes. As you age cellular errors are going to happen and there are repair enzymes to deal with these issues. All of these enzymes which have become known now over the past 10 years or so are NAD-dependent. As you age NAD supply will decline, yet as you age repair enzyme activity increases. Suddenly you're suffering a gap from the NAD needs for those repair enzymes when you're suffering a decline in NAD simultaneously.… If you can fix that gap, if you can repair the NAD supply, you can give repair enzymes the jolt they need to do their job. If they don’t have NAD, they won’t do the job. That’s what been published over the past few years. At least mechanistically we know how nicotinamide riboside works and we can thank Charlie Brenner for that [Ed.note: Charles Brenner, PhD, is a famed University of Iowa biochemist whose work disclosed roles of NAD.] Brenner discovered nicotinamide riboside as a NAD precursor, he identified the enzyme pathway for NRK, nicotinamide riboside kinase. Mechanistically we’re in pretty good position, we understand exactly where nicotinamide riboside fits, the enzyme path that converts it into NAD and the importance of NAD to all these other pathways.
KSS – I was going to ask you if there were any outright overt NAD deficiency states, or some specific medical syndrome you might link with NAD deficiency.
FJ – Yes, Cockayne Syndrome. There’s more than Cockayne by the way, but I will use this for now, and it’s the perfect model. Cockayne syndrome is a genetic disorder where afflicted children die as if from old age. The average lifespan of a Cockayne child is twelve, and they suffer all the hallmarks of aging, starting at 4, 5, 6 years old. Their growth is stunted, they don’t develop properly. They suffer from neurodegenerative disorders, hearing loss, vision loss, and all of it is linked to one thing. Their genetic abnormality causes massive upregulation of PARP. There's a hyper-PARP response and PARP is so overexpressed that it bleeds the NAD pool dry, so the accelerated aging conditions that these kids suffer from is a result of massive depletion of NAD.
KSS – Can it be averted with doses or infusions of NAD?
FJ – Well we’re working on that right now, ChromaDex is working collaboratively with NIH. At The National Institute of Aging, a guy named Vilhelm Bohr, MD, PhD, DSc, [Ed. note: Bohr is the grandson of Nobel laureate physicist Niels Bohr] identified the link between PARP and NAD depletion in Cockayne syndrome and using nicotinamide riboside as a way of providing NAD supply. You won’t be able to fix the genetic abnormality, at least not now, but can we effectively improve the quality of life of kids developmentally at an early age and potentially how long they may live. It’s a good proxy for us for the importance of NAD to aging.
AL – This is being sold as a supplement right now, so why didn’t you pursue this as a drug? Was it because it was easier to commercialize as supplement?
FJ – Yes. The supplement market is a multi billion-dollar market and I don’t have to wait 10-15 years to get approval.
AL – So you mentioned that your supplement is being used in many different medical studies. So if it gets approved for an indication, would you be able to charge different prices or would you have to sell it for the same price you do as a supplement?
FJ – You mean for Cockayne syndrome for example? That’s a good point. We were just in the midst of talking about that right now. I mean it’s a very micro orphan disease. There are only a couple hundred kids who have it. That use wouldn't be highly differentiated from the product that we have right here [he motions to a bottle of the ChromaDex supplement]. So are we going to be able to charge $25,000 a year when somebody can buy it for $40 bucks a bottle? I doubt it. Are we going to be able to come up with a differentiated form? Is it more effective in this population if you inject it for example… these kids happen to have digestive issues. Even now we’re preparing to go in with a feeding tube product so that essentially you just add water, shake, and syringe it in through the feeding tube. So it is different, we will have a differentiated formulation, but ultimately the real question is if it will really be differentiated as an injectable or an IV form.
KSS – The FDA has long obfuscated around this issue claiming that only a drug will treat a disease. So if you were to have scurvy due to a lack of vitamin C, I guess they would say scurvy is not a disease. They’re really not consistent on what’s a disease vs happenstance nutrient deficiency or on what’s remedied by drug versus nutrient supplement. The profit margin for treating nutrient deficiency is trivial, thence accusations from critics that the agency advocates for, is in the pocket of, Pharma. I admire Chromadex for keeping relative distance from this particular fray.
FJ – And look, we’re not a pharmaceutical company, and even though we have over the past few years pursued opportunities like Cockayne syndrome, we are not a drug development company, not set up to run clinical trials. We don’t want to give the impression that we’re a drug development company because investors then start freaking out that we’re just going to keep burning cash. Our focus is on this, ok? If we can collaborate with NIH on studies to show value in nicotinamide riboside then there’s going to be a halo effect. The bigger value we will get out of Cockayne is the halo effect that it impacts aging and whether we make money on it as a drug or not, I almost don’t care. Look I’d love to collect the [pediatric rare disease] vouchers ok? [collective laughter]. I’d be happy to take that, we’ll take that, there’s some value in that but we do have other forms of meaningful revenue. Nicotinamide riboside isn’t the only precursor that we have. Still, first and foremost we are an NAD company. Nicotinamide riboside is part of the story but we do have other compounds that we are working on. And some of them by form and function might only see development as drugs.
KSS - I’m guessing nicotinamide riboside is aqueous and water soluble?
FJ – It’s incredibly water soluble.
KSS - Are there states like celiac disease where its absorption is impaired?
FJ – We're not down to that yet but I doubt it’ll be highly impaired. We have to figure those things out where there are issues and whether there are absorption issues caused. I mean, in the case of Cockayne we don’t have concrete evidence that there will be problems [with malabsorption] but the fact that they’re so NAD depleted means that there may an issue in absorption of NAD precursors from food that they’re consuming. So you know I’m drawing a conclusion only from that fact but we have to assume at this point that oral administration may not the most effective way of delivery. These patients by no means represent the normal population.
AL – As a nutrient supplement, what’s the patent protection like or can anyone else do this?
FJ – No, they can’t, thankfully.
AL – Great, yeah I was just wondering because when one hears of most supplements there’s a billion companies that sell them.
FJ – So we don’t have composition of matter on the structure itself. You cannot patent the structure of nicotinamide riboside. But we have sixteen patents in our portfolio that protect it. Two of those patents, the Dartmouth patent, have been challenged. Both of them challenged in an IPR. Earlier this year the first patent survived the IPR. That’s a great fact for us, as surviving an IPR is not easy these days. The patent in question was a dietary-related patent. The second one was composition of matter not to the structure, but there was a composition of matter tied up with the use of nicotinamide riboside as an NAD precursor and that, the so-called Dartmouth patent, is probably the strongest one we have to protect this. Now we have been building other ways of patent protection and one of them is around crystal polymers so we do have a specific crystal polymer.
AL – So are you guys the only ones doing this right now?
FJ – Well yes. We are the only legitimate company selling this product.
AL – I assume there are many competitors trying to weasel their way in?
FJ – Yes it’s public information. We are in a litigation with Elysium health. When you do your homework, you’ll find it.... it’s not difficult to find. Elysium health was a customer of ours that turned around and tried to circumvent us to your point.
KSS – Are they Chinese?
FJ – No they’re not, that might make it easier actually. You’ll find plenty of that story out there so we don’t have to bog it down but we are in litigation. They bought $3 million worth of product, they never paid for it, they sold all that product to generate revenue, found a way to manufacture and circumvent us as to supply, attacked our patents through our IPR process, and then have gone out and essentially tried to make it look to the best of their ability that they stole two of our employees.
AL – Damn, I mean I’m relatively new to biotech and being with Dr. KSS I hear all types of stories, but this is a whole different level….
FJ – Well look this is flattering in some ways to be honest with you because we created something of that much value that these guys tried to steal it. In some ways I’ve said this even to some of our other investors but as painful as this has been, they’ve done us a favor in certain ways. I’d rather it never happened but patents are only as valuable as them being defended. Until a patent has been defended, there’s a question mark over the top of it. If we successfully sue them and knock them out of the market and defend our patents, then we’re going to be in a much better position. The market is only in its infancy, this is only starting. It would be much worse for us if this happened later on when it matures.
KSS – Are they going to defend themselves?
FJ – Well they are: they are doing their best to stall the litigation, probably to figure out what the hell they’re going to do. But they know what they did. Discovery is showing that. That stuff is starting to show in public court records now and eventually they will blow up like Theranos did.
KSS – Why is what they did not outright criminal conduct?
FJ – I hope it goes there. I can’t talk about that specifically but nonetheless I wish it was a clean world of nice people. Unfortunately…
KSS – You may be drawing a meme or a something in the zeitgeist. When someone cites a discussion of NAD, there’s so much insight into what it does… there’s so much meat to go on it. You just start pulling and you realize there’s a massive story whereas the story for so many things washes out after a reference or two or dies. Vitamin D is dying that sort of death now…
FJ – You're right. These guys, the two founders of [Elysium] were bankers. One of them was a VC who worked for Sequoia capital. He early identified the opportunity and the trajectory of where it was going. It’s clear where NAD is going. It’s unlikely to change course, to die down, because now there's so much evidence out there.
AL – I can’t believe someone from a reputed firm as Sequoia would do something like that.
FJ – I can imagine a banker doing something like that [boisterous laughter all around]. I try to check my pockets when I’m around bankers hahaha
KSS – Are you sold on Amazon right now?
FJ – Yes. So this product right now is sold on our website and Amazon. Those are our two primary channels. It’s direct to consumer. Direct to consumer is now a very effective method of selling product, and that’s essentially what we’re doing. The traditional routes through GNC and retail are tough and not very efficient anymore.
FJ – Toxicity is nil indeed, and we’ve shown that. We do have two NDIs [new dietary ingredients designations] from the FDA. We have brass status from the FDA which is not easy to get. I mean NDIs are a 88% failure rate and we got both of ours on first try. NDI is entirely about safety. The FDA doesn’t give a damn if they work or not. The first thing they care about is whether or not things are safe. But what we care about, given that safety is there, is proving out the efficacy. And you're right, we’re not selling a promise for longevity. You know, the resveratrol guys back in the day were making all these bogus anti-aging and longevity claims and we DO NOT do that. We are taking the higher road, and it’s a nutrient deficient story associated with age and progression of age related disease and if you want to repair that, we’ve now proven in the clinics that 100% of the time we raise NAD levels. Every clinical study that has been published so far demonstrates that if you take nicotinamide riboside, you will raise NAD.
KSS – For the casual reader, at what point do you get an appreciable rise in cellular metabolism? Say at what point are you 30% higher or 50% higher… what’s the time frame?
FJ – First day, from the moment you take it. Our first study was a single dose administration and shockingly enough we got statistical significance in raising NAD at 2 other doses in that study in a single dose administration.
KSS – And these are people not known to be deficient?
FJ – That’s correct, as a matter of fact, you're not supposed to use a deficient population in dietary supplement clinical trials. You're supposed to use healthy normal people. So in the second study we did a 140-person double-blinded placebo-controlled trial for six weeks and three doses demonstrated significant increase in NAD, and increases from dose 1 all the way through the course of the 6 week period. It continued to increase your baseline NAD level.
AL – I guess going forward this will primarily be a marketing story then right?
FJ – It’s a marketing story, but it’s one that we’re going to keep direct to consumer. We’re going to use primarily social media related mechanisms for sending message. A big Forbes article was published this morning (https://www.forbes.com/sites/adambarsouk/2018/11/14/a-miracle-pill-that-slows-aging-this-ceo-thinks-so/#48adbd0b36eb) on our product, nicotinamide riboside, and that's the most effective way of capturing the audience, and you're right the educated population is our largest consumer right now. We need to expand beyond that but the early adopters are mostly all on board with us. Now for us it’s a good thing this crowd is generally the most skeptical yet they are the ones driving on to this right now. Using like the Forbes article like the one we have right now, it’s very easy to build awareness.
AL – In the long term, when you’ve saturated the early adopters market, would you consider other channels such as GNC?
FJ – Maybe. We’re making a LOT more from direct to consumers. If we sold this at GNC, and I know know cuz we’ve done this before, let’s say this is $40 a bottle, you’ll have to wholesale it to GNC for at least 50-60%. They are going to take at least 60% of that sale ok, so we’ll wholesale it to them for $15-18. They’re going to make $22 bucks a bottle or more. Our margins now are what it costs us to produce it and we sell it to consumers at full retail.
AL – I notice that you're aggressively expanding into Asia, and that’s a huge market. I know whenever my mom goes back to China, she always brings back fish oil and such…
FJ – China is probably going to be our biggest market. We’re doing it the right way, we’re going to get regulatory approval, we’re going to set everything up the right way, and we’re definitely going to go after that large market in a big way. And you probably saw that one of our investors, Horizons Ventures, is a VC firm, part of the Li Kai Shing family (Asia’s richest man). He invested $50 million (USD) in us last year,
AL- OK, this is HUGE.
FJ – China is going to be our biggest market and we need to align ourselves with the best person for it.
AL – I was worried due to all the failed execution stories in China but wow….
FJ - Yeah, I know the importance of it. I have a family history of pharmaceuticals in China. My father started a Chinese pharmaceutical company back in the 90s and sold to GSK in 2011….
KSS – Allan this will give you red hair!
FJ – Actually my mother, when she started to take our supplement, said her hair color started coming back. She'd been all gray.
KSS – No way! How old is she?
FJ – She’s 80.