In a Jan. 7 research note, analyst Ram Selvaraju reported that H.C. Wainwright & Co. increased its price target on ChromaDex Corp. (CDXC:NASDAQ) to $7 per share from $6 after the nutraceutical company entered into a license and supply agreement with Nestlé Health Science, which develops and commercializes science-based nutritional health solutions. ChromaDex's current share price is about $3.52.
Per the agreement, Nestlé gains the exclusive right to include ChromaDex's Tru Niagen, a form of nicotinamide riboside, in its branded medical nutrition, and it gets the co-exclusive right to incorporate Tru Niagen in specific products in its consumer health segment. The agreement covers the geographical regions of North America, Europe, Latin America, Australia, Japan and New Zealand.
In exchange, Nestlé will pay ChromaDex $4 million upfront. It also will make payments when commercial milestones are reached, as well as tiered royalty payments to ChromaDex. Selvaraju estimates the latter to be in the mid-single-digit percent range.
Selvaraju pointed out the primary benefit of the new partnership is Nestlé affords ChromaDex entry into the medical nutrition arena, and that market is sizable. It will surpass $6 billion in size by 2025 in solely the United States, as estimated by Persistence Market Research. "ChromaDex now has a partner with the heft and breadth needed to effectively position Tru Niagen within the medical nutrition domain," he added.
Another advantage for ChromaDex is Nestlé could complement the nutraceutical company's existing commercial partner, Watsons, in the consumer products arena. "Tru Niagen may thus eventually become a key component in a broad array of consumer products marketed through both the Nestlé Health Science and Watsons channels, while ChromaDex retains the ability to pursue its own consumer products initiatives based on the nonexclusive structure of the Nestlé Health Science partnership," noted Selvaraju.
H.C. Wainwright reiterated its Buy rating on ChromaDex.
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Disclosures from H.C. Wainwright & Co., ChromaDex Corp., Target Price Revision, January 7, 2019
Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
I, Raghuram Selvaraju, Ph.D., certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst's household has a financial interest in the securities of ChromaDex Corporation (including, without limitation, any option, right, warrant, future, long or short position).
As of December 31, 2018 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of ChromaDex Corporation.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The Firm or its affiliates did not receive compensation from ChromaDex Corporation for investment banking services within twelve months before, but will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
The Firm does not make a market in ChromaDex Corporation as of the date of this research report.
H.C. Wainwright & Co., LLC and its affiliates, officers, directors, and employees, excluding its analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research report.
