Omega 3 Drugs

Global Market forEPA/DHA Omega-3 Products

September 2012

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Global Market for EPA/DHA Omega-3 Products September 2012 Global Market for EPA/DHA Omega-3 Products has been prepared by Packaged Facts. This report is based on research commissioned by The Global Organization for EPA and DHA Omega-3 (GOED) Packaged Facts serves consumer product and service companies and allied businesses in the United States and internationally with a complete line of research publications. Our market intelligence reports are designed to aid the executive decision-maker by providing essential data and concise analysis with a focus on marketplace trends, consumer insights, and emerging opportunities.

Vice President of Publishing Don Montuori Research Director and Publisher David Sprinkle Author Packaged Facts

Publication Date September 2012

All rights reserved. No part of this report may be reproduced without permission of the publisher.

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Global Market for EPA/DHA Omega-3 Products Table of Contents

September 2012 Packaged Facts i

Table of Contents

Chapter 1:Executive Summary .................................................. 1Scope of Report ...................................................................................... 1Report Methodology ............................................................................... 1

Market Size and Composition .......................................................... 3Market Composition by Geographic Region .................................................... 3

Table 1-1: EPA/DHA Omega-3 Products: Global Market Size and Share by Region, 2011 ............................................................................... 3

Figure 1-1: EPA/DHA Omega-3 Products: Global Market Share by Region, 2011 .......................................................................................... 3

Market Composition by Product Category ....................................................... 4

Table 1-2: EPA/DHA Omega-3 Products: Global Market Size and Share by Category, 2011 ............................................................................ 4

Figure 1-2: EPA/DHA Omega-3 Products: Global Market Share by Category, 2011 ...................................................................................... 4

Factors to Market Growth ...................................................................... 5Projected Market Growth ....................................................................... 8

Table 1-3: Global Market for EPA/DHA Omega-3 Products, 2011 vs. 2016 ............................................................................................. 8

Projected Growth by Geographic Region ........................................................ 8

Table 1-4: EPA/DHA Omega-3 Products: Projected Global Market Size and Share by Region, 2016 ........................................................................ 8

Figure 1-3: EPA/DHA Omega-3 Products: Projected Global Market Share by Region, 2016 ............................................................................... 9

Projected Growth by Product Category ........................................................... 9

Table 1-5: EPA/DHA Omega-3 Products: Global Market Size and Share by Category, 2016 .......................................................................... 10

Figure 1-4: EPA/DHA Omega-3 Products: Global Market Share by Category, 2016 .................................................................................... 10

Table of Contents Global Market for EPA/DHA Omega-3 Products

ii Packaged Facts September 2012

Chapter 2:Market Review .......................................................... 11Global Market Size and Composition ................................................. 11

Table 2-1: EPA/DHA Omega-3 Products: Global Market Size and Share by Region, 2011 ............................................................................. 11

Figure 2-1: Share of EPA/DHA Omega-3 Products by Global Region, 2011 .......................................................................................................... 12

Market Composition by Product Category ..................................................... 12

Table 2-2: EPA/DHA Omega-3 Products: Global Market Size and Share by Category, 2011 .......................................................................... 13

Figure 2-2: Share of EPA/DHA Omega-3 Product Sales by Global Region, 2011 ................................................................................. 13

Category Focus: Infant Formula ........................................................ 14Category Value by Region ............................................................................ 15

Table 2-3: DHA/ARA-Fortified Infant Formulas: Global Market Size and Share by Region, 2011 ...................................................................... 15

Figure 2-3: Share of DHA/ARA-Fortified Infant Formula Sales by Global Region, 2011 ............................................................................ 15

U.S. Market Trends ....................................................................................... 15

Emerging Market Trends ............................................................................... 16

Figure 2-4: Birth Rates by Global Regions, 2010 .......................................... 16

Figure 2-5: Birth Rates for Selected Countries, 2010-2015 .......................... 17

Category Focus: Fortified Foods and Beverages ............................. 18Category Value by Region ............................................................................ 18

Table 2-4: EPA/DHA-Fortified Foods & Beverages: Global Category Size and Share by Region, 2011 .............................................................. 19

Figure 2-6: Category Share of EPA/DHA-Fortified Food & Beverage Sales by Global Region, 2011 .................................................. 19

Dairy Products ............................................................................................... 19

Beverages and Juices ................................................................................... 22

Baby Food and Pediatric Juices .................................................................... 23

Breads and Bakery ........................................................................................ 23

Processed Meats ........................................................................................... 24

Cooking Oils .................................................................................................. 24

Figure 2-7: Estimated Average Daily Intakes of EPA/DHA by Country (in mg/day based on 2,000 kCAL diet) ..................................................... 25

Prepared Products ........................................................................................ 26

Other Foods .................................................................................................. 27

Global Market for EPA/DHA Omega-3 Products Table of Contents

September 2012 Packaged Facts iii

Category Focus: Nutritional Supplements ......................................... 28Category Value by Global Region ................................................................. 28

Table 2-5: EPA/DHA Nutritional Supplements: Global Category Size and Share by Region, 2011 ...................................................................... 28

Figure 2-8: Category Share of EPA/DHA Omega-3 Nutritional Supplements by Global Region, 2011 ...................................................... 29

Category and Regional Trends ..................................................................... 29

Category Focus: Pharmaceuticals ...................................................... 32Lovaza ........................................................................................................... 32

Epadel ........................................................................................................... 33

Category Value by Region ............................................................................ 33

Table 2-6: EPA/DHA Pharmaceuticals: Global Category Size and Share by Region, 2011 ............................................................................. 34

Figure 2-9: Share of EPA/DHA Pharmaceutical Sales by Global Region, 2011 ............................................................................ 34

Category Perspective .................................................................................... 34

Table 2-7: Omega-3 Fatty Acid Pharmaceutical Products in Development .................................................................................... 35-36

Source: GOED (Global Organization for EPA and DHA Omega-3) .............. 36

Table 2-8: Potential Generic Drug Manufacturer Market Entry ..................... 37

Category Focus: Clinical Nutrition ..................................................... 38Category Value by Region ............................................................................ 39

Table 2-9: Clinical Nutrition Products with EPA/DHA: Global Category Size and Share by Region, 2011 .............................................................. 40

Figure 2-10: Share of Sales for Clinical Nutrition Products with EPA/DHA by Global Region, 2011 ........................................................... 40

Established and Emerging Markets ............................................................... 40

Figure 2-11: Population Aged 65 or Older by Country: 2010 vs. 2015 .......... 41

Category Focus: Pet Food, Treats and Supplements ...................... 42Category Value by Region ............................................................................ 43

Table 2-10: EPA/DHA-Fortified Pet Food, Treats, and Supplements: Global Category Size and Share by Region, 2011 ................................... 43

Figure 2-12: Share of Sales for Pet Food, Treats, or Supplements with EPA/DHA by Global Region, 2011 .................................................... 44

Market Scales Up and Expands Out ............................................................. 44

Projected Sales and Shares by Geographic Region ..................................... 46

Table 2-11: EPA/DHA Omega-3 Products: Projected Global Market Size and Share by Region, 2016 .................................................. 46

Table of Contents Global Market for EPA/DHA Omega-3 Products

iv Packaged Facts September 2012

Figure 2-13: EPA/DHA Omega-3 Products: Projected Global Market Share by Region, 2016 ................................................................. 47

Figure 2-14: Projected CAGR for EPA/DHA Omega-3 by Region, 2011-2016 ................................................................................................ 47

Projected Sales and Shares by Product Category ........................................ 48

Figure 2-15: Projected Global Market Shares for EPA/DHA Omega-3 Products by Category, 2016 ..................................................................... 48

Table 2-12: Projected Market for DHA/ARA-Fortified Infant Formula: Overall and by Global Region, 2011-2016 ............................................... 48

Table 2-13: Projected Market for EPA/DHA-Fortified Food & Beverages: Overall and by Global Region, 2011-2016 ............................................... 49

Table 2-14: Projected Market for EPA/DHA Nutritional Supplements: Overall and by Global Region, 2011-2016 ............................................... 49

Table 2-15: Projected Market for EPA/DHA Pharmaceuticals: Overall and by Global Region, 2011-2016 ............................................... 50

Table 2-16: Projected Market Clinical Nutrition Products with EPA/DHA: Overall and by Global Region, 2011-2016 ............................................... 50

Table 2-17: Projected Market for EPA/DHA-Fortified Pet Food, Treats, and Supplements: Overall and by Global Region, 2011-2016.................. 51

Summary of Factors to Future Growth .............................................. 52

Global Market for EPA/DHA Omega-3 Products Chapter 1: Executive Summary

September 2012 Packaged Facts 1

Chapter 1 Executive Summary

Scope of Report

This report focuses on the global market for EPA / DHA omega-3 packaged products by category and global region. Products included in this study are fortified with eicosapentaenoic acid (EPA) or docosahexaenoic acid (DHA). Traditional sources of EPA and/or DHA omega-3s include fish oils from anchovy or cod livers but new sources include krill, squid (or calamari) and algae. Excluded from scope of this study are non-fortified fish/ fish products as well as products that only contain alpha linoleic acid (ALA) omega-3.

The geographic scope of this report is global, broken out into four regions: North America

(United States and Canada); Europe (Scandinavia, Western Europe, Eastern Europe and Russia); Asia Pacific (China, Japan, South and Southeast Asia, Australia, New Zealand and Oceania); and Rest of World (Latin America, Middle East and Africa).

Six categories of packaged consumer products are covered by this report: infant formula;

fortified foods and beverages; nutritional supplements; pharmaceuticals; clinical nutrition (enteral and parenteral) products; and pet food, treats and supplements.

The base year for market sizing is 2011, with projections for 2016.

Report Methodology

The information contained in this report was obtained from primary and secondary research. Primary research entailed approximately one hundred interviews with industry insiders across geographic regions and product categories. Representatives from ingredient suppliers and consumer product manufacturers were interviewed, including special and much-appreciated cooperation by members of the Global Organization for EPA and DHA Omega-3 (GOED). Consultations with other industry players and on-site examination of retail products also formed part of this study.

Secondary research included extensive Internet canvassing and data gathering from relevant

business and industry media; company information in annual reports, press releases, conference calls and investor presentations; product profiles in trade and consumer publications; GOED presentations and databases; published reports and studies; and related

Chapter 1: Executive Summary Global Market for EPA/DHA Omega-3 Products

2 Packaged Facts September 2012

food and nutrition market reports by Packaged Facts. Sales estimates and forecasts are based on analysis of data and information from the above sources.

All market size figures and projections are calculated in U.S. dollars.



Market Size and Composition

Global consumer spending on EPA/DHA fortified products across the six product categories covered by this report reached $25.4 billion in 2011.

Market Composition by Geographic Region

By geographic region, North America (U.S. and Canada) accounted for 42.6%, or $10.8 billion of these consumer sales. Europe and Asia-Pac each claim 26.2%. The rest of the world accounted for 5.0% of total spending, or $1.26 billion. [Table 1-1; Figure 1-1]

Table 1-1 EPA/DHA Omega-3 Products: Global Market Size and Share by Region, 2011

Region Dollar Sales (Billions) Dollar Share

Overall $25.42 100.0%

North America 10.83 42.6

Europe 6.67 26.2

Asia-Pacific 6.66 26.2

Rest of World 1.26 5.0

Source: Packaged Facts

Figure 1-1 EPA/DHA Omega-3 Products: Global Market Share by Region, 2011


42.6%

26.2%

26.2%

5.0% NorthAmerica

Europe

AsiaPac

RestofWorld

2011 Market Value$25.4 B



Market Composition by Product Category

By product category, infant formula anchors the market. Approximately 87% of infant formula is EPA/DHA fortified, creating a $10.2 billion dollar market, or 40.0% of the total. Fortified foods and beverages follow at $7.9 billion, or 31.0%. Nutritional supplements place third at $3.2 billion, or 12.7%, followed by pharmaceutical products at $1.9 billion and clinical nutrition products at $1.4 billion. The smallest of the product categories covered by this report is the pet food, treat, or supplement arena, at $0.9 billion in EPA/DHA fortified products. [Table 1-2; Figure 1-2]

Table 1-2 EPA/DHA Omega-3 Products: Global Market Size and Share by Category, 2011

Category Dollar Sales (Billions) Dollar Share

Overall $25.42 100.0%

Infant Formula 10.18 40.0

Food and Beverage 7.88 31.0

Nutritional Supplements 3.22 12.7

Pharmaceutical 1.90 7.5

Clinical Nutrition 1.35 5.3

Pet Food, Treats, & Supplements 0.89 3.5


Figure 1-2 EPA/DHA Omega-3 Products: Global Market Share by Category, 2011


31.0%

3.5%

12.7%

40.0%

5.3%7.5%

FoodandBeverage

PetFood,Treat&SupplementsNutritionalSupplements

InfantFormula

ClinicalNutrition

Pharmaceutical




Factors to Market Growth

The central factor to growth in this market is, of course, the growing range of health benefits attributed to EPA/DHA omega-3. EPA/DHA omega-3s play important roles in both primary and secondary prevention of chronic diseases, as well as general nutrition. More than 2,000 clinical trials on the effects of omega-3s have been conducted in humans, including four large, prospective long-term, randomized, controlled trials. Additionally, multiple evidence-based reviews and meta-analyses have shown significant reductions in chronic disease risk with increased consumption of EPA and DHA.

Within this overarching context, each geographic region and category within the global

market for EPA/DHA products brings its own dynamics.

The infant formula market is the worlds fastest-growing packaged food category, primarily due to the development of markets in Asia (particularly China) and Eastern Europe, and to a lesser extent in the Middle East and Latin America. Market development is linked with the economic growth of those countries and the growing number of working women who want premium products and the convenience of infant formula. The need for infant formula enrichment with DHA and ARA for non-breast-fed infants has been recognized by various official bodies including the United Nations FAO/WHO (Food and Agriculture Organization/World Health Organization), which recommends that all infant formula should contain DHA and ARA. An estimated 87% of infant formula sold in 2011 was fortified with DHA and ARA.

Factors contributing to growth in the fortified food and beverage category include changes in consumers diet and lifestyles and more proactive interest by consumers in their own health; scientific studies detailing multiple benefits of EPA/DHA omega-3s; awareness raised by the omega-3 supplement category; and expanding technological capabilities to incorporate fish and algae oils into the full range of food products and beverages. Omega-3 beverages are among the expanding product segments, as reported in FoodBusinessNews.net (August 14, 2012); according to Mintels Global New Products Database, 34 new beverages with omega-3 fatty acids were introduced in 2011, up from 26 in 2010 and 16 in 2009. Asia will be the fastest-growing market (15% projected CAGR for 2011-2016) for this category.

The nutritional supplements category continues to though, though at a slower rate than the previous five boom years. The market is not fully saturated nonetheless, and producers are using new formulas to grow market size and shares. Developed country dynamics include a



favorable demographic shift and focus on health and wellness. In emerging economies, the focus is on addressing nutritional deficiencies and fulfilling the needs of an expanding middle class.

While supplements are targeted at the prevention and maintenance market segments,

pharmaceutical products are targeted at treatment of severe dyslipidemia. In this contextin contrast to Rx-to-OTC switchesthe two product categories are complementary, each boosting awareness of the other, and serving as a positive factor to overall market potential.

Currently there are only two approved omega-3 pharmaceutical products on the market. The first product is commercialized in 57 countries and sold under the brand names of Lovaza (U.S.), Omacor and Zodin (Europe and Asia), and Eskim, Esapent and Seacor (Italy). The second product is produced by Mochida Pharmaceuticals (Japan) and sold under the trade name of Epadel. Over the next five years these prescription products will be introduced to additional national markets, including Brazil and Argentina, and are expected to be well-received. In addition, several new competitors will enter the omega-3 drug market over the next few years, including Amarin Corp., Catabasis Pharmaceuticals, and Omthera Pharmaceuticals. Amarin submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) in September 2011 for the use of its drug Vascepa as an adjunct to diet to reduce triglyceride (TG) levels in adult patients with severe ( 500mg/dL) hypertriglyceridemia, and announced FDA approval in July 2012. Generic manufacturers, in addition, are attempting market entry as patents expire. The cardiovascular/metabolic market is the largest pharmaceutical drug segment and market opportunities are increasing due to westernization of lifestyles, aging populations, and increased access to healthcare.

Products in the clinical nutrition category, which includes enteral (oral or tube fed) as well as parenteral (fed through an IV) formulations, benefit from the addition of omega-3 fatty acids because these have anti-inflammatory properties and are beneficial to trauma patients and those with chronic wounds. Clinical nutrition is also provided to cancer patients and patients with general malnutrition. Factors driving growth include aging populations and increased use of enteral products in homecare settings.

Growth in the pet food, treats and supplements category will be driven by the recent humanization trend in companion animal products and services. Label claims and ingredients found in human diets, such as EPA/DHA omega-3s, attract pet owners who want to provide the very best for their pets, which are increasingly viewed as members of the family. The global expansion of pet superstores will create more opportunities for



EPA/DHA fortified pet foods, especially in developing market like Asia-Pacific, Latin America, and Eastern Europe. In more developed markets, additionally, private label pet food is becoming more premium, including through fortification with fish oils.



Projected Market Growth

Packaged Facts projects market value of EPA/ DHA omega-3 packaged products to reach $34.7 billion in 2016, representing a compound annual growth rate (CAGR) of 6.4% and a dollar gain of $9.3 billion over 2011. [Table 1-3]

Table 1-3 Global Market for EPA/DHA Omega-3 Products, 2011 vs. 2016

Year Dollar Sales (Billions)

2011 $25.42

2016 $34.72


Projected Growth by Geographic Region

Sales in North America will reach $13.0 billion in 2016, and this region will continue to account for the largest slice of the market, although its share is projected to notch downward from 42.6% in 2011 to 37.6% in 2016. Asia-Pacific will jump to a close second-place position by nearly doubling in market value between 2011 and 2016, increasing its market sales to $12.5 billion and its global share from 26.2% to 35.9%. Market value in Europe will grow to $7.6 billion in 2016, although the relative global share held by this region will edge downward to 21.9%. Packaged Facts estimates that market sales in Rest of World, including Latin America, Middle East and Africa, will reach $1.6 billion in 2016, with global market share dropping slightly to 4.7%. [Table 1-4; Figure 1-3]

Table 1-4 EPA/DHA Omega-3 Products: Projected Global Market Size and Share by Region, 2016


Overall $34.72 100.0%



Europe 7.61 21.9





Figure 1-3 EPA/DHA Omega-3 Products: Projected Global Market Share by Region, 2016


Projected Growth by Product Category

Packaged Facts projects that the consumer market for DHA-fortified infant formula will reach $14.2 billion in 2016, reflecting a CAGR of 6.8% for the 2011-2016 period. Asia-Pacific will post the highest regional five-year growth rate, at 14%.

The market value of EPA/DHA fortified foods and beverages is projected at $10.2 billion in 2016, for a CAGR of 5.4% over the five-year period. Asia-Pacific will post by far the highest regional growth rate in this category, at 15%.

The value of the EPA/DHA nutritional supplements market is expected to reach $4.6 billion in 2016, reflecting a five-year CAGR of 7.3%. Asia-Pac will post the highest regional growth at 13%, trailed by North America at 5.5%.

The EPA/ DHA pharmaceuticals market is projected at $3.1 billion in 2016, reflecting a five-year CAGR in dollar value of 10%. Volume growth, moreover, will outstrip dollar growth as generics become a factor in the category. Anticipated dollar growth in Asia-Pac is 12.5%, followed by North America at 10%. Several companies will enter the omega-3 drug market over the next few years; some are in advanced clinical trials. Category growth will be framed by new market entrants, including the introduction of generics, based on the interplay of regulatory approval, patent expiration, and legal action related to patent protection.

The value of the clinical nutrition market for products with EPA/DHA fortification is projected to reach $1.7 billion in 2016, reflecting a five-year CAGR of 4.3%. Asia-Pacific

37.6%

21.9%

35.9%

4.7%

NorthAmerica

Europe

AsiaPac

RestofWorld




should post the highest regional growth rate at 5%, but will be followed closely in growth rate by the other global regions.

Market size for the EPA/DHA fortified pet food, treats and supplements is projected at $1.05 billion in 2016, reflecting a five-year CAGR of 3.4%. Rest of World will have the highest regional growth at 8%, due largely to activity in Brazil. [Table 1-5; Figure 1-4]



Overall $34.72 100.0%








Figure 1-4 EPA/DHA Omega-3 Products: Global Market Share by Category, 2016


29.5%

3.0%

13.2%

40.7%

4.8%8.8% FoodandBeverage

PetFood,Treat&Supplements

NutritionalSupplements

InfantFormula

ClinicalNutrition

Pharmaceutical


Global Market for EPA/DHA Omega-3 Products Chapter 2: Market Review

August 2012 Packaged Facts 11

Chapter 2 Market Review

Global Market Size and Composition

The market for eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA) omega-3 products has been very dynamic over the past few years. Packaged Facts estimates global consumer spending on EPA/DHA fortified products at $25.4 billion in 2011 for the six categories covered by this report: infant formula; fortified foods and beverages; nutritional supplements; pharmaceuticals; clinical nutrition; and pet food, treats and supplements.

North America represents the largest share (42.6%) of the market, with $10.8 billion in sales

in 2011, followed by Europe and Asia-Pac, each at nearly $6.7 billion. Combined sales in Latin America, Middle East and Africa reached $1.3 billion in 2011. [Table 2-1; Figure 2-1]

Table 2-1 EPA/DHA Omega-3 Products: Global Market Size and Share by Region, 2011


Overall $25.42 100.0%


Europe 6.67 26.2




Chapter 2: Market Review Global Market for EPA/DHA Omega-3 Products


Figure 2-1 Share of EPA/DHA Omega-3 Products by Global Region, 2011


Market Composition by Product Category

The three largest of the six products categories covered by this report account for 83.7% of the total market: infant formula, fortified foods and beverages, and nutritional supplements. Infant formula anchors the market both in sales and in introducing many consumers and primary household shoppers to EPA/DHA fortification. Approximately 87% of infant formula is EPA/DHA fortified, creating a $10.2 billion dollar market, or 40.0% of the total. Fortified foods and beverages follow at $7.9 billion, or 31.0%. Nutritional supplements place third at $3.2 billion, or 12.7%. The remaining three categories are pharmaceutical products at $1.9 billion, clinical nutrition at $1.4 billion, and pet food, treat, or supplements at $0.9 billion in sales. [Table 2-2; Figure 2-2]

42.6%

26.2%

26.2%

5.0% NorthAmerica

Europe

AsiaPac

RestofWorld






Overall $25.42 100.0%








Figure 2-2 Share of EPA/DHA Omega-3 Product Sales by Global Region, 2011


31.0%

3.5%

12.7%

40.0%

5.3%7.5%

FoodandBeverage

PetFood,Treat&SupplementsNutritionalSupplements

InfantFormula

ClinicalNutrition

Pharmaceutical




Category Focus: Infant Formula

The infant formula market is the worlds fastest-growing packaged food category, primarily due to the development of markets in Asia (particularly China, with an annual growth rate close to 20%), Eastern Europe, and, to a lesser extent, the Middle East and Latin America. Market development is linked with the economic growth of these countries and the growing number of working women who want premium products and the convenience of formula.

Algae oils have a high DHA content and dominate in DHA infant formula fortification.

The need for infant formula enriched with DHA and ARA for non-breast-fed infants has been

recognized by various official bodies including the United Nations FAO/WHO (Food and Agriculture Organization/World Health Organization), which recommends that all infant formula should contain DHA and ARA. An estimated 87% of infant formula sold in 2011 was fortified with DHA and ARA. As one industry participant contacted for this study commented, With regard to infant formulas, it is kind of standard to have DHA these days. If you dont have it, they want to know why. In the near future, many expect non-DHA/ARA infant formula to become virtually extinct, unless some specific consumer demand keeps it in play.

In 2011, the top five global players in the infant milk formula market were Nestle, Mead

Johnson, Danone, Abbott Laboratories and Pfizer. In April 2012, Nestle agreed to buy Pfizers infant nutrition business, illustrating the industrys rapid consolidation with manufacturers expanding their share of developing world markets. While the top five brands account for 20.8% of the global market, the top five manufacturers have a commanding 57.6% market share.



Category Value by Region

In 2011, North America represented the largest share (34%) of the category at $3.46 billion, followed by Asia-Pac at $3.36 billion and Europe at $2.75 billion. The Rest of World accounted for approximately 6% or $611 million in sales. [Table 2-3; Figure 2-3]

Table 2-3 DHA/ARA-Fortified Infant Formulas: Global Market Size and Share by Region, 2011


Overall $10.18 100%

North America 3.46 34

Asia-Pacific 2.75 33

Europe 3.36 27

Rest of World 0.61 6


Figure 2-3 Share of DHA/ARA-Fortified Infant Formula Sales by Global Region, 2011


U.S. Market Trends

The U.S. market is dominated by three brands with a combined 90% share of sales: Mead Johnson Nutrition Cos Enfamil (40% of the market), Abbott Laboratories Similac (40%), and Nestls Good Start (10%). These infant formula manufacturers have shrewdly developed longstanding relationships with U.S. health-care providers such that new parents often leave

34%

27%

33%

6%

NorthAmerica

Europe

AsiaPac

RestofWorld




the hospital with free samples of infant formula. The perceived endorsement by health-care providers is key in developing brand awareness and in having consumers establish a relationship with these products during the first week of an infants life.

Even though doctors and hospitals are placing greater emphasis on breastfeeding, infant

formula often becomes a more convenient option when mothers return to the workplace following maternity leave. And while the high cost of formula is a consideration for some parents who favor breastfeeding, the U.S. market is actually heavily subsidized through such governmental programs as food stamps and the Special Supplemental Nutritional Program for Women, Infants, and Children (WIC).

Emerging Market Trends

In emerging markets, high birth rates are spurring the infant formula market. In Africa, notably, the number of live births per 1,000 in population is 36.20, roughly three times the rate as in Europe (10.31) or North America (13.45). [Figure 2-4]

Figure 2-4 Birth Rates by Global Regions, 2010

Source: United Nations Statistics Division, www.data.un.org, accessed June 2012

Increasing urbanization and a burgeoning middle class support further growth in sales of infant formula. As with their developed world counterparts, women in the developing world are increasingly returning to work after childbirth, fostering greater reliance on infant formula

10.31

11.01

13.45

18.71

18.96

20.27

22.24

36.20

Europe

Moredevelopedregions

NorthAmerica

Asia

LatinAmerica

World

Lessdevelopedregions

Africa

0 10 20 30 40

Number of Live Births per 1,000 Population



versus breastfeeding. Chinese mothers also place a premium on top foreign brands and imports, especially after mainland Chinas 2008 scandal involving milk powder tainted with the toxic chemical melamine. Although Chinas one-child policy means that its birth rate slightly lags the U.S., analysts estimate that its middle class already roughly the size of the entire U.S. population could reach 700 million people by 2020. The volume of infant formula sold in China is thought to be larger than that in the U.S., though the U.S. market has a higher retail sales value due to higher price points.

Indias birth rate exceeds Chinas by over 10 live births per 1,000 in population. With

roughly 25 million babies born each year, the subcontinent has the fastest growing infant nutrition market in the world. At an estimated $400 million, Indias baby food market is just a fraction of the Chinese market, but the Indian market is expected to grow to $700 million by 2015. [Figure 2-5]

Figure 2-5 Birth Rates for Selected Countries, 2010-2015

Source: United Nations Statistics Division, www.data.un.org, accessed June 2012

7.80

8.06

8.40

9.94

10.97

11.90

12.32

12.55

13.72

15.75

19.91

22.83

Japan

Germany

Italy

Spain

RussianFederation

UK

France

China

UnitedStates

Brazil

Mexico

India

0 5 10 15 20 25 30

Numer of Live Births per 1,000 Population



Category Focus: Fortified Foods and Beverages

Several forces have propelled the growth of functional food and beverages, including changes in consumers diet and lifestyles and an increasingly pro-active interest in personal health. The incorporation of EPA and DHA in particular into functional foods has exploded due to a range of factors including the growing range of scientific research on the benefits of EPA/DHA omega-3, the popular reputation of salmon as a superfood, and awareness raised by the omega-3 supplement category.

Expanding technological capabilities have also contributed to fortification of food and

beverage products with EPA/DHA omega-3s. Through the leveraging of various ingredient sources, encapsulation and emulsification technologies, and product formats, the range of applications and product choices is multiplying. Food applications were once limited to lipid friendly spreads and yoghurts because of flavor and stability considerations. However, recent technological advances have made the use of omega-3s in other food categories more common including dairy products, beverage and juices, infant nutrition products, breads and baked goods, processed meats, cooking oils, and various prepared foods.

At the same time, health and wellness are priorities held and marketed by many of the

worlds largest food and drink companies. Nestle, notably, bills itself not as the worlds biggest food company but as the worlds leading Nutrition, Health and Wellness company.

With global food and beverage leaders looking to the functional food category for growth

opportunities, success depends on the creation of a differentiated product benefit that fits within their brand portfolios. While there are ground-breaking smaller companies in each region that offer EPA/DHA fortified foods, the potential for significant category expansion lies largely in might of multi-national food corporations, the rate at which they bring these new products to market, and the brand equity and marketing clout they devote to these efforts.


In 2011, North America represented the largest share (51%) of the EPA/DHA fortified foods and beverages category at $4.0 billion. Products enriched with EPA/DHA were introduced in mainstream U.S. supermarkets in 2006, giving Americans an early opportunity to adopt these products into their diets. Ranking second in category size is Europe at $2.05 billion and Asia-Pacific at $1.4 billion.



Table 2-4 EPA/DHA-Fortified Foods & Beverages: Global Category Size and Share by Region, 2011


Overall $7.88 100%

North America 4.02 51

Europe 2.05 26

Asia-Pacific 1.42 18

Rest of World 0.39 5


Figure 2-6 Category Share of EPA/DHA-Fortified Food & Beverage Sales by Global Region, 2011


Dairy Products

Dairy products have proven to be particularly suitable for fortifying with omega-3s, in terms of both ingredient compatibility and popularity with consumers. In addition, fortified dairy products have been available for many decadesin the U.S., fortification of milk with vitamin D dates back to 1933and many consumers are comfortable with the concept of dairy product fortification, whether with vitamins/minerals, probiotics, or omega-3. In the U.S. market, additionally, dairy products are usually sold and stored cold and have a short shelf live, which helps to maintain the stability of the omega-3.

51%

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Typical omega-3 fortified dairy or dairycase products include: yogurt (spoonable or

drinkable), milk drinks, fresh and UHT milk, and margarines and spreads. The U.S. and Europe are the strongest markets for dairy products, but differ in their segmentation. Europe has a much stronger yogurt market (four times larger than the U.S.), while the U.S. has a stronger milk market.

A representative from one research institute said, The micro encapsulation technology that we developed is naturally suited for dairy products; therefore, we have seen that market become very active. Many of the products are branded towards children at this time as EPA and DHA are well known among consumers to be a benefit for young brain development. It is only natural for a parent who would spend extra for a DHA fortified formula to want to choose a DHA fortified milk or yogurt as the child grows beyond formula. Any food that is made with the dairy product can easily be fortified using our technology as we encapsulate the fish oil with dairy proteins. Breads and cereals are another area in which we are seeing a high-growth in omega-3 fortification.

A U.S company that sells an omega-3 milk product revealed the growth of our omega milk product [is] higher than our average growth rate. This assessment was echoed in statements from an organic dairy product supplier: fortified products will grow approximately 2 to 4% faster than unfortified. Fortified yogurts represent a higher volume.



Soy milks also tout DHA omega-3 claims through fortification with DHA algal oil.

Spains omega-3 fortified-milks sector has been developing for a number of years, and in fact

makes up the majority of the heart-health milks sector, which accounted for nearly 6% of total milk sales through Spanish food channels in 2011. Puleva, now part of Lactalis, pioneered the market in the late 1990s. Its original Puleva Omega-3 UHT milk product line has now been expanded to include Puleva Omega-3 with walnuts; both formulas are fortified with fish oil. The sector has expanded to encompass a wide range of branded and own-label products, with most major dairy companies having at least one omega-3 line in their portfolio.

In China, DHA could formerly only be incorporated into infant formulas, but in January 2010

DHA as well as EPA ingredients won novel foods approval from Chinese authorities to enter the mainstream food supply. Chinas largest dairy, claiming approximately 35% of the domestic market, is Mengniu. Its Future Star Kid Milk, available nationally at major retailers, now uses algae oil DHA and has won several product awards.

In addition, EPA/DHA omega-3s can be easily added to butter and spreads. Many consumers

expect margarines and spreads to be enriched with additives or to offer special benefits, such as plant sterol enrichment for lowering cholesterol. In the U.S., Smart Balance spreads are the number 3 player in $1.3 billion spread category; EPA/DHA fortified spreads are key products



for the company. In Spain, Puleva has introduced Burgos Omega 3, a dairy product with fresh cheese made from semi-skimmed milk.

Beverages and Juices

In the past, beverage manufacturers found it challenging to fortify drinks with omega-3 fish oils due to the ingredient's 'fishy' taste and smell. However, through technological advances, omega-3 ingredients with a neutral sensory profile are now available. This means that omega-3 can be added to various beverage products, with one of the most popular being fruit juice.

In the U.S., market leaders in the fortified juice category include Minute Maid Enhanced Pom

Blueberry and Tropicana Pure Premium Health Heart Orange Juice. Indian River offers a fortified grapefruit juice. Genesis Today introduced a line of orange juice, Omega Orange that is fortified with algae oil. In Canada, A. Lassonde produces a variety of juices fortified with microencapsulated fish oil. In the U.K, Big Shotz, described as a super-vitamin health drink, offers over 70% of the new European recommended daily adult level of omega-3 in one 120 ml bottle. In Norway, Smartfish Recharge is a fresh juice based drink for children and adults fortified with marine fatty acids.

Globally, the market for omega-3 enriched drinks is growing steadily. A key marketing

advantage is that these products can be targeted to consumers of either gender and all ages.



Baby Food and Pediatric Juices

The popularity of DHA-fortified infant formulas has given rise to toddler and pediatric foods and drinks fortified with DHA. Gerber DHA and Probiotic Cereal (in two varieties, oatmeal and rice) and 2nd Foods Smart Nourish Purees (in various fruit and vegetable varieties) are fortified with tuna oil. PBM Nutritionals, the largest producer of store brand infant formula, produces its Bright Beginnings pediatric drink with DHA algal oil. DrSEARS Cool Fuel uses refined fish oil from anchovies and sardines.

A leading company spokesperson said, Nearly all infant formulas contain DHA fortification for all brands. This is true globally as well as in the U.S. Baby food fortification is a newer area. We anticipate broadening our line of DHA fortified children's products. An organic baby food manufacturer indicated that among baby foods, DHA fortified products are growing in the high single digits because it is a newer area of fortification.

Breads and Bakery

Bread plays a central role in the Western diet, and innovative ingredients such as omega-3 are used by the bakery industry to offer products with added health benefits. High-quality fortified breads are increasingly popular with consumers for addressing dietary priorities or deficiencies. They're a good vehicle for providing EPA and DHA at adequate levels.

Breads and cereals are another area in which we are seeing a high growth in omega-3 fortification, commented one industry insider. An industry consultant agreed, stating, Dairy products are a good match, as well as breads. A European Bakery spokesperson said, We have a lot of bread that is targeted for 4 to 12-year-olds which contains microencapsulated omega-3 fish oil. Product acceptance for this line of bread has been better than expected. Our market truly appreciates our national concern for our children.

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International launched its Arawana 3A+ premium cooking oil in China, fortified with fish oil. In less than nine months, an estimated 25 million bottles had been sold, according to a company spokesman.

Fortified cooking oils in the U.S. include Crisco Puritan Canola Oil and Pompeian Olive

Extra Plus with Omega 3 DHA.

Figure 2-7 Estimated Average Daily Intakes of EPA/DHA by Country (in mg/day based on 2,000 kCAL diet)

Source: GOED (Global Organization for EPA and DHA Omega-3), derived from Hibbeln JR et al .(2006), American Journal of Clinical Nutrition (83): 1483S-93S.



Ragasa, one of Mexicos largest providers of raw and refined oil products and makers of Mexicos leading consumer cooking oil brand, Nutrioli, offers the Nutrioli DHA product fortified with algae oil. While these products have not enjoyed the phenomenal success as their Chinese counterparts, they are making solid inroads as niche products.

Prepared Products

Modern, fast-paced lifestyles have resulted in the more frequent consumption of prepared, processed meals. Food manufacturers continue to capitalize on this trend by developing more appealing and healthier products. Processed foods are often fortified to restore nutrients lost in their production, while others are fortified to increase a product's added nutritional value or to create a differentiated new product.

Infants and young children are one of the groups at risk of dietary deficiencies. They need a

high level of nutrients, but their food choices are limited and the amount they consume is relatively low. At the same time, prepared products such as chicken nuggets or fish fingers are very popular with children. In the United Kingdom, both of the leading frozen fish finger brands, Birds Eye and Youngs, include an omega-3 fish fingers product in their ranges, and the Birds Eye version is now the number-three frozen-fish brand line in the UK. The fish are a natural source of omega-3s, and the batter is fortified with refined fish oil. Similar products are offered throughout Europe, including Captain Iglo Omega-3 Fish Fingers in the Netherlands. By offering EPA/DHA omega-3 enriched products, parents can help ensure that their children are receiving their nutritional needs.



Other Foods

There are many other products targeted at children that provide good sources of omega-3 DHA. Prime examples of other foods types that lend themselves to fortification include peanut butter and breakfast spreads. In the U.S., Smucker offers its Jif Peanut Butter brand in both Creamy and Crunchy varieties with omega-3 DHA and EPA from anchovy and sardine oils.

Australian company Natures Blend launched a new omega-3

breakfast spread aimed at children in late 2011. The yeast spread, Omegamite, contains fish oils.

Fortified snacks are also designed to attract nutrition-conscious parents. Farm to Table

Canada developed an Omega-3 Kettle Corn fortified with fish oil. The product meets nutrition guidelines of Ontario schools, and individual serving size packages are promoted to children as great for lunches or as a snack. DrSEARS Family Essentials entire product line is fortified with omega-3 DHA. Products include Omega-3 DHA Fruit Chews, Cool Fuel Kids Bars, Popumz (natural whole grain crisps), and Cool Fuel (nutritional beverage).



Category Focus: Nutritional Supplements

The global nutritional supplement industry is estimated at $92 billion in 2011, with 18% or $16.5 billion represented by the specialty/other category (in distinction to vitamin/mineral and multi-formulas). In terms of specialty supplements, the single largest category is fish oil products, accounting for approximating $3.2 billion in retail sales 2011. Fish oil edges out homeopathics, glucosamine/chondroitin, and probiotics for the lead among these specialty supplement types.

Category Value by Global Region

In 2011, North America represented the largest share (42%) of the $3.2 billion supplement market at $1.35 billion, followed by Asia-Pacific (28%) at $900 million, Europe (25%) at $810 million, and the Rest of World at $161 million. [Table 2-5; Figure 2-8]

Table 2-5 EPA/DHA Nutritional Supplements: Global Category Size and Share by Region, 2011

Region Dollar Sales (millions) Dollar Share

Overall $3,220 100%

North America 1,350 42

Asia-Pacific 900 28

Europe 810 25

Rest of World 161 5




Figure 2-8 Category Share of EPA/DHA Omega-3 Nutritional Supplements by Global Region, 2011


Category and Regional Trends

Consumers are becoming more proactive in self care and using various types of nutritional supplements to maintain help health, reduce risk of illness, or address sickness and disease. Currently the U.S. generates the majority of global supplement sales, Western Europe is second, and Japan third. However, China is expected to overtake Japan in nutritional supplement sales due to the growing interest of its emerging middle class in nutrition and supplements. Other growing markets include Brazil, India, and Eastern Europe.

Another global industry insider provided this overview: The North American market has begun to plateau. It is still growing but not nearly at the rate that it initially had. Higher grade supplements are definitely growing faster than low-grade within that market. Europe has very slow growth. There is a very difficult regulatory process involved that will continue to hinder growth. Asia-Pacific is growing by far the fastest but there are many difficulties; mainly because there is no standard in regulation within the region. However product acceptance is very strong.

Developed country dynamics include a favorable demographic shift and focus on health and

wellness. Even so, the North American market has slowed due to saturation of these types of products among the group who readily buy supplements. There is now strong competition between supplement manufacturers to highlight their products within the category. In 2011, in the U.S. food/drug/mass merchandiser channel, fish oil supplement sales showed growth of 4%, while the newer segment of krill supplements surged by 72%. Krill supplements

42%

25%

28%

5%

NorthAmerica

Europe

AsiaPac

RestofWorld




currently hold a market share of approximately 8% in the U.S. omega-3 supplement segment. There is a general movement towards krill oil and higher strengths in fish oils, using descriptive terminology such as triple strength and pharmaceutical grade. Combination products with benefit claims such as Triple Strength + Brain Support, Triple Strength Fish Oil + Reservatrol, and Triple Strength Fish Oil 1400 + Skin Support are populating the shelves. Multi-vitamin/mineral formulas are also incorporating and touting the benefits of EPA and DHA.

Europe is experiencing the slowest growth due to regulatory issues and a sluggish economy.

In emerging economies, the focus is on addressing nutritional deficiencies and fulfilling the needs of an expanding middle class. Regionally, according to one contact, Latin America is sluggish due to lack of consumer awareness when it comes to Omega 3s. There is a serious lack of education on the benefits of Omega 3s there. Whey protein is big, but Omega 3s haven't caught on. In relation to Latin America, an ingredient supplier noted that In South America and Central America, we typically have a diet that is high in Omega 3s naturally because of the amount of fish that we eat; therefore, these supplements are not a strong market here.

Additional product trend comments from supplement manufacturers and ingredient suppliers

follow:

Nutritional supplements have been the focus of fish oil suppliers because of the amount of ingredients used in these products. Many of these supplements have become commodity type items and so the focus is now on differentiating products by premium formulations. This product group has slowed down significantly over the last few years; however it continues to grow.

The largest overall trend that we've observed is producers moving from a low-grade to a high-grade omega-3 concentrate. Part of our business strategy has been to help develop and encourage this trend. Our profit margin is very low in low-grade omega-3s. In fact, the market will be shifting more and more toward South America in the low-grade concentrates because the crude oil suppliers have been developing refining capability to produce low-grade concentrate. They are able to market a low-grade oil at a significantly better cost than any European refinery. In high-grade concentrates, we are able to make a respectable profit and the technology is not nearly as accessible to other companies before us in the supply chain. So what we see is a significant trend in the supplement market away from low-grade Sam's Club or



Walmart commodity products towards specialty stores and direct marketing of higher quality concentrated fish oils.

Marine derived omega-3s are very important to the nutritional supplements category. If you look on the shelf, you will see product after product of a concentrated single ingredient, whether it be fish oil or cod liver oil or krill oil. However, supplements that are multivitamins will also contain an EPA and DHA omega-3 at some level.

It is by far the hottest ingredient in that market and so you see many multivitamins, which are the largest single segment, incorporating omega 3s.



Category Focus: Pharmaceuticals

While supplements are targeted at the prevention and maintenance market segments, pharmaceutical products are targeted at treatment of severe dyslipidemia. In this contextin contrast to Rx-to-OTC switchesthe two product categories are complementary, each boosting awareness of the other, and serving as a positive factor to overall market potential.

Currently there are only two approved omega-3 pharmaceutical products on the market. The

first product is commercialized in 57 countries and sold under the brand names of Lovaza (U.S.), Omacor and Zodin (Europe and Asia), and Eskim, Esapent and Seacor (Italy). The second product is produced by Mochida Pharmaceuticals (Japan) and sold under the trade name of Epadel.

Over the next five years these prescription products will be introduced to additional national

markets, including Brazil and Argentina, and are expected to be well-received. In addition,

several new competitors will enter the omega-3 drug market over the next few years.

Lovaza

The first product, from Pronova, is commercialized in 57 countries and sold under the brand names of Lovaza (U.S.); Omacor and Zodin (Europe and Asia); and Eskim, Esapent and Seacor (Italy). It is the first U.S. and European Union approved omega-3 prescription drug, and is currently in use by an estimated 1.4 million heart patients around the world. An estimated 1.2 billion capsules are consumed annually, resulting in end-user sales of $1.4 billion

The drugs success is attributed to its strong efficacy and an extensive network of commercial partners with world class marketing, sales and distribution capabilities. These include Abbott Laboratories, Kuhnil, Prospa, Pfizer, Grupo Ferrer, Pierre Fabre, GlaxoSmithKline and Takeda. Pronova BioPharma exclusively provides the oil for the softgel capsules that are manufactured in the U.S. by Catalent Pharma Solutions.



Lovaza, also known as omega-3-acid ethyl esters, is a prescription form of fish oil that's

highly concentrated. Each 1-gram capsule contains 463 mg eicosapentaenoic ethyl ester (EPA) and 375 mg docosahexaenoic ethyl ester (DHA). As a result, it provides the optimal dose for treating high triglycerides and requires fewer pills than with supplements available over the counter. As a prescription medication, Lovaza underwent rigorous testing and clinical study to demonstrate its safety and efficacy before being approved by the Food and Drug Administration (FDA). This is not the case with omega-3 supplements found at the health food store. Pronova BioPharmas oils are manufactured at the groups pharmaceutical plants in Scandinavia, using a unique and complex proprietary process involving the removal of most other fatty acids, cholesterol and environmental pollutants.

The pharmaceutical drug is approved in the U.S. and many European and Asian markets, as

an adjunct to diet and other lifestyle changes for the treatment of elevated levels of triglycerides. Triglycerides have been linked to cardiovascular diseases and are included in the American Heart Association and European and Asian treatment guidelines. The drug has also been approved in several European and Asian markets for the secondary prevention of post-myocardial infarction in the period following the initial survival of a heart attack. In addition, the drug has been shown to be complementary to other lipid-lowering agents, such as statins. Statins are some of the most commonly used medications for patients with cardiovascular disease and high triglycerides.

Epadel

The second approved product is produced by Mochida Pharmaceuticals and sold under the trade name of Epadel. The generic name is ethyl icosapentate. It is approved in Japan and estimated 2011 sales are $485 million. Epadel was the first drug in the world in which EPA-E (ethyl icosapentate: one of the poly-unsaturated fatty acids contained in fish oil) was successfully extracted and purified to a high degree. It is used for treating arteriosclerosis obliterans and hyperlipidemia.


In 2011, North America represented the largest share (53%) of the market at $1.0 billion, followed by Asia-Pac at $490 million and Europe at approximately $400 million. Rest of World sales are negligible to date due to lack of product availability. [Table 2-6; Figure 2-9]



Table 2-6 EPA/DHA Pharmaceuticals: Global Category Size and Share by Region, 2011


Overall $1,900 100%

North America 1,010 53

Asia-Pacific 490 26

Europe 400 21


Figure 2-9 Share of EPA/DHA Pharmaceutical Sales by Global Region, 2011

Source: Packaged Facts Source: Packaged Facts

Category Perspective

The cardiovascular/metabolic market is the largest pharmaceutical drug segment. Over 270 million people suffer from dyslipidemia in the seven largest markets, of which 100 million have been diagnosed. Market opportunities are increasing due to westernization of lifestyles, aging populations, and increased access to healthcare.

During the next 5 years, Pronova has big plans for the Lovaza product. It is on track for

launch in Japan in 2013, Japan being the worlds second largest pharmaceutical market. Geographical expansion into emerging markets will continue as well. In 2011, the product received regulatory approval in Brazil, Argentina and Macedonia plus launch in Venezuela. Regulatory approval is expected by 2012 in India, Hong Kong, South Africa, Malaysia and other nations.

53%

21%

25%



Overall end user sales (by weight) of Pronova BioPharma oils into major markets increased

7% from 2010 to 2011. Sales in the U.S., the largest market, increased by 4%. The highest sales growth rates, ranging from 5% to 33%, occurred in European countries.

The success of Lovaza has inspired other companies to develop various types of omega-3

fatty acid pharmaceuticals for disorders affecting large numbers of people. Amarin Corp. submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) in September 2011 for the use of its drug Vascepa as an adjunct to diet to reduce triglyceride (TG) levels in adult patients with very high triglycerides (severe hypertriglyceridemia of 500mg/dL), and announced FDA approval in July 2012. Vascepa is also in Phase III clinical trials for patients with high triglycerides. In addition, as of August 2012, Omthera Pharmaceuticals product Epanova had completed enrollment of Phase III clinical trial; and Catabasis Pharmaceuticals is linking a form of omega-3 fatty acid to salicylate in hopes of creating a synergistic effect beneficial to treatment of diabetes and other disorders with inflammation as an underlying cause. [Table 2-7]

Table 2-7 Omega-3 Fatty Acid Pharmaceutical Products in Development

Company Drug Indication Stage

Acasti Pharma Capre High triglycerides Phase II

Capre Mixed Dyslipidemia Pre-clinical

Amarin Corp. Vascepa Very high triglycerides NDA Approved

Vascepa High triglycerides Phase III

AMR101 High triglycerides w/ dyslipidemia Phase III

AMR101 Prevention of cardiac events Phase I

Catabasis Pharmaceuticals CAT 1002 Inflammatory Diseases Phase I

CAT 1000 Type 2 Diabetes with Inflammation Phase II

CAT 2000 High triglycerides with dyslipidemia Preclinical

CAT 2003 Severe hypertriglyceridemia Preclinical

CAT 4000 Psoriasis Preclinical

CAT 4000 Multiple sclerosis Preclinical

CAT 5000 Ultra orphan inflammatory disease Discovery

(cont.)



Table 2-7 [cont.] Omega-3 Fatty Acid Pharmaceutical Products in Development

Company Drug Indication Stage

Epax AS AKR 963 Very high triglycerides Phase III

Endeavor Therapeutics Endeav101 Speech disorders in autism spectrum Phase I

Hanmi Pharmaceuticals HCP1007 Mixed dyslipidemia Phase I

Mochida Pharmaceuticals MND-21 Non-alcoholic fatty liver disease Phase II

Omthera Pharmaceuticals Epanova Very high triglycerides Phase III

Epanova High triglycerides w/ dyslipidemia Phase III

Epanova Prevention of cardiac events Pre-clinical

Pronova Biopharma PRC-4016 Mixed Dyslipidemia Phase I

PRC-4016 Atherosclerosis Pre-clinical

Unknown Chronic inflammatory diseases Discovery

Resolvyx Pharmaceuticals RX-10045 Dry eye disease Phase II

RX-10045 Retinal disease Phase I

RX-10001 Asthma Phase I

RX-10001 Irritable bowel disease Phase I

RX-10001 Rheumatoid arthritis Phase I

RX-10001 Cardiovascular Disease Phase I

RX-20001 Multiple Indications Pre-clinical

Resolvin Analogs Multiple Indications Pre-clinical

Source: GOED (Global Organization for EPA and DHA Omega-3)



Further diversifying the omega-3 drug market will be the global entry of generic omega-3 drugs. Lovazas patent protection was lost in Europe in August 2009, but no generic products have entered the EU market yet. In the U.S., the patent is protected until 2017. [Table 2-8]

Table 2-8 Potential Generic Drug Manufacturer Market Entry

Company Description

Apotex Inc. Independent Canadian pharmaceutical company with exports to 115 countries.

Chiesi Farmaceutici Based in Italy and engaged in R & D of pharmaceutical solutions focusing on respiratory diseases and neonatology

Endo Pharamceuticals

Offering high value branded pharmaceuticals plus manufacturer and distributor of generic drugs and OTC products. Also provide medical devices primarily to urology community.

Institut Biochemique

Privately owned, pharmaceutical company headquartered in Lugano, Switzerland. 1800 employees and sells its products covering 7 main therapeutic areas in 4 continents and more than 70 countries.

Nissui Group Based in Tokyo, Japan, business centered on research, development, production and sales of culture media and diagnostics for medical institutions, research organizations and food industries; Development production and sales of pharmaceuticals and health foods for pharmacies and drugstores.

Sandoz (Novartis) Generic pharmaceuticals division of Novartis and second-largest generics company in the world, employing approximately 24, 000 people across the globe.

Teva Pharmaceutical Industries

Among the top 15 pharmaceutical companies in the world and the leader in generic pharmaceuticals. Teva operates in 60 countries with ~40,000 employees worldwide.

Par Pharmaceutical Acquired by Teva in July 2012, Par Pharmaceutical develops, manufactures, markets and distributes pharmaceuticals through two divisions: Par Pharmaceutical (generic), and Strativa Pharmaceuticals, (proprietary). Employs > 600 professionals in the US

Generic manufacturers filed a Paragraph IV challenging the listed patent to see if it is valid and enforceable. However, as reported by Pharma Times on May 31, 2012, GlaxoSmithKline and partner Pronova BioPharma are celebrating after the latter beat off a patent challenge to their fish oil heart drug Lovaza from Teva and Par Pharmaceuticals. Generics are nonetheless in the works, whatever the schedule of market entry.



Category Focus: Clinical Nutrition

Clinical nutrition includes enteral and parenteral nutrition products. Enteral nutrition is ingested both orally and through tubes such as PEG (percutaneous endoscopic gastrostomy), and delivered into the digestive system as a liquid. Parenteral nutrition feeds an individual intravenously, bypassing the usual process of eating and digestion. The first option for feeding is oral, of course, with enteral feeding a second choice. Parenteral nutrition is usually the third option used to achieve good nutrition.

Clinical nutrition can be delivered in an inpatient setting such as hospital, nursing home and

rehabilitation centers and also as outpatient home care under a doctors supervision.

The clinical nutrition market is conservative in pace of development because formula changes

and new product introductions require clinical trials and must go through a rigorous regulatory approval process, usually country by country.

Even so, one area that has sparked new developments in enteral formulas has been the

addition of omega-3 fatty acids, which have anti-inflammatory properties and are good for trauma patients and those with chronic wounds. Elemental enteral formulas are prescribed for patients with impaired digestive and absorptive capacity and feature partially or fully hydrolyzed proteins. Elemental enteral formulas including EPA/DHA omega-3s include Abbott Laboratories Optimental, Pivot 1.5 and Vital AG 1.2 Cal. Nestle Nutrition products include Impact Glutamine, Impact Peptide 1.5 and Peptamen AF. Abbotts Optimental formula is used for acute conditions such as trauma, surgery, burns, pancreatitis, and multiple



fractures and for chronic conditions such as irritable bowel syndrome (IBD), Crohns Disease, radiation enteritis and malnutrition.

Specialized enteral formulas are designed to meet the nutrient needs of patients with specific

illnesses. Specialized enteral formulas that have EPA/DHA omega-3s include Abbott Laboratories OXEPA and several formulas within Nestls Impact product line. B. Braun and Fresenius Kabi also offer clinical nutrition products with fish oil. Nestls Impact is formulated to help support the bodys immune defense for a faster recovery and is given to surgical and trauma patients. Although some clinical nutrition products may not be prescribed solely for the benefits of EPA/DHA omega-3 but for others like arginine, these products are used extensively.

Smartfish is a Norwegian biotech company developing synergistic omega-3 based pharmaco-

nutrition products. Its patented technology is the basis for the product range of orally applied liquid emulsions. Smartfish clinical nutrition product NutriFriend 1100 is especially developed for cancer cachexia patients and NutriFriend 600 for general malnutrition. These products are partially reimbursed under state health schemes in the Nordic countries.

According to one U.S.-based physician, In Europe, interestingly, they have IV preparations of Omega 3s, which are very intriguing, and that may be the way that we end up needing to go.

An ingredient supplier notes that clinical nutrition is an interesting space. Its a small space right now, but I think its got a lot of potential and certainly a lot of benefits for people who are recovering from a stroke or who are recovering from a severe concussion.


In 2011, North America represented the largest share (35%) of the market at $470 million, followed by Europe (33%) at $450 million and by Asia-Pacific (27.5%), led by Japan and Australia, at $450 million.

Rest of World accounted for approximately 4.5% of the global market, or $61 million.

[Table 2-9; Figure 2-10]



Table 2-9 Clinical Nutrition Products with EPA/DHA: Global Category Size and Share by Region, 2011


Overall $1,355 100%

North America 470 35

Europe 450 33

Asia-Pacific 370 27.5

Rest of World 61 4.5


Figure 2-10 Share of Sales for Clinical Nutrition Products with EPA/DHA by Global Region, 2011


Established and Emerging Markets

Several factors influence growth in most markets. These include growing and aging populations, higher incidence of chronic disease, government involvement, increased life-expectancy, and shifting in facility types from in-patient hospital care to home care. Mature markets such as the United States, Japan and Western Europe are penetrated with products from market leaders including Abbott Laboratories, Nestle, Danone (Nutricia), Mead Johnson, Fresenius Kabi, and B. Braun. These regions host a large percentage of older populations and have established reimbursement guidelines in place. [Figure 2-11]

35%

33%

27.5%

4.5%

NorthAmerica

Europe

AsiaPac

RestofWorld




Figure 2-11 Population Aged 65 or Older by Country: 2010 vs. 2015

Source: United Nations Statistics Division, www.data.un.org, accessed June 2012 and Packaged Facts

Developing regions are showing increased interest in enteral nutrition products, and have continued to expand as reimbursement policies are enacted and medical professionals are educated in their applications. While demand for enteral products remains steady in the United States and Japan, markets in less developed regions of Europe, Asia Pacific and Latin America are increasing significantly. One factor driving growth is the increased use of enteral products in home care settings, which is continuing to grow worldwide.

7,201

7,820

10,290

10,544

12,322

13,652

16,775

18,297

28,707

40,534

60,278

109,845

8,445

8,555

11,499

12,010

13,312

16,495

17,506

19,072

33,109

46,949

70,462

129,928

Mexico

Spain

UK

France

Italy

Brazil

Germany

RussianFederation

Japan

UnitedStates

India

China

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000

2015

2010

CAGR 3.4%

CAGR 3.2%

CAGR 3.0%

CAGR 2.9%

CAGR .8%

CAGR .9%

CAGR 3.9%

CAGR 1.6%

CAGR 2.6%

CAGR 2.2%

CAGR 1.8%

CAGR 3.2%



Category Focus: Pet Food, Treats and Supplements

The recent humanization of companion animals has been a strong driver in the way consumers generally perceive pet products and brands. Label claims and ingredients found in human diets, such as EPA/DHA omega-3s, attract pet owners who want to provide the very best for their pets, which are increasingly seen as members of the family.

Global retail sales of pet food, treat, and supplement products are estimated at nearly $60

billion in 2011. Packaged Facts estimates that approximately 1.5% of this market, or $0.9 billion, is fortified with EPA/DHA omega-3s. (Fish meal is excluded from this sizing.)



Key products include many puppy and kitten foods; select premium dog and cat food

formulas; and dog treats and dietary supplements marketed as solutions for improving skin and coat or fur.

Puppy and kitten foods tout the benefits of DHA as an important nutrient for healthy brain

and vision development, and in some instances also reference it as a nutrient also found in mothers milk.

Adult food formulas associate fish oil fatty acids with enhanced active mobility plus bone/

joint cartilage support.

Supplements come in multiple formats such as softgel capsules, soft chews, chewable tablets

and liquid oil, and usually promote glossy, silky coats. Fish oil supplements represent approximately 10% of all pet supplement sales.


In 2011, North America represented the largest share (58%) of the market at $510 million, followed by

Omega 3 Drugs

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