Special Report: Nutritional Growth Solutions (NGS), the nutraceutical company behind the ‘Healthy Height’ formula-based protein powder that promotes healthy childhood growth hit the ASX boards Friday.
In early trade Friday, the newly-listed ASX company’s share price had advanced 70 per cent to 34c from its IPO price of 20c.
Ahead of its IPO, Stockhead spoke with NGS chief executive, Liron Fendell, about this important next step in the company’s development into a world-wide enterprise.
The share offer has been well received by institutional and sophisticated investors, and interest in the IPO has exceeded the number of available shares, said Fendell.
“The offer has gone extremely well and was oversubscribed after getting strong support from Australian investors,” she said.
Priced at 20c per share, the IPO will raise between $6m and $7m from issuing 30 million to 35 million shares in NGS. The offer closed within a day of opening on October 13.
NGS started with a market value of $24.4m to $25.4m when its shares began trading on the ASX on October 30.
Adelaide-based broker Baker Young Limited led the IPO and managed a recent $1.5m Pre-IPO raise for the company.
NGS to invest in sales and marketing to reach more customer groups
The company intends to spend $3m of the IPO proceeds on marketing and sales support for its ‘Healthy Height’ and other protein-based products in new and existing markets.
This will include some rebranding activity to better position its products in the market.
“We will have an overarching brand for our products which is being launched in early 2021,” Fendell said.
Currently, 90 per cent of NGS’s sales are in the US market, and a similar product to ‘Healthy Height’ is sold in India under the Horlicks brand.
Online sales through Amazon and NGS’s own website are the main product distribution channels, and the company plans to significantly increase sales through various retail outlets and wholesale distribution agreements.
‘Healthy Height’ is the company’s foundation product aimed at children in the three-to-nine-year age group, to which NGS has added nutritional growth products for older children.
These new products are targeted at different market segments and age groups and are covered by intellectual property patents in countries including the US, Australia and Europe, with patents pending in Asia.
‘Healthy Height Junior Growth Formula’ is for children aged 10 years and older, and ‘Healthy Height Sports Formula’ is aimed at children engaged in sporting activities like athletics.
A clinical trial for ‘Healthy Height’ showed that children who consumed it for one year added 13.8 to 34 per cent to their annual growth in height, said NGS’s IPO prospectus.
The company’s nutritional growth powder is consumed in milkshakes and is made from dairy ingredients with added scientifically-formulated minerals and vitamins that promote childhood growth.
NGS products cover three different growth markets
NGS’s products effectively overlap three related markets – infant formula, nutritional supplements and foods for special medical purposes – with a combined value of $US229bn ($319bn), according to a report by Frost & Sullivan commissioned by the company.
Around 30 per cent of children in the US consume a dietary supplement, as do a similar proportion of children in China, said Frost & Sullivan’s report.
“Market growth between 2010 and 2020 is estimated at 3.4 per cent in the US and 9.9 per cent in China, with the total market in both countries approaching $US3bn, with the global market estimated at $US8.6bn in 2020,” said Frost & Sullivan referring to paediatric supplements.
Competition in the markets targeted by NGS varies with some multinational companies present such as Abbott Laboratories and Nestle for paediatric nutritional supplements.
“The nutraceutical market is competitive with other players, but we believe our products are differentiated with medical-based and nutritional research, and we are focusing on older age groups of children where there is less competition,” said Fendell.
Springboard into lucrative market for China
Australia is seen by NGS as a springboard for the company’s launch into the fast-growing China market, where strong demand is forecast for its nutritional growth formula products.
“We are looking at the Australian market as a gateway into China,” said Fendell.
“Even though we are selling into the US market, significant enquiries are coming from the Chinese market, which is why we are looking to list in Australia,” she said.
The company is actively looking to produce its products in Australia and possibly New Zealand, given their proximity to Asian markets.
“Currently, we are producing in Utah for the Chinese market, and we are looking to shift production to New Zealand for China,” said Fendell.
“We already have a distributor in China which is selling ‘Healthy Height’ there,” said Fendell.
NGS is looking at other distribution channels such as health food stores, pharmacies, supermarkets and wholesalers for its products.
In the European market, NGS has a distributor in Italy and a manufacturer in Germany.
The company is also considering sales outreach programs with medical practitioners.
“We are looking at expanding our medical outreach as it would be beneficial for health and nutrition practitioners,” said Fendell.
NGS board has medical, biotech and marketing expertise
Meditech entrepreneur Brian Leedman has joined the board of NGS as its independent non-executive chairman and brings expertise in a range of disciplines.
They include investor relations and marketing and as a biotech entrepreneur he founded ResApp Diagnostics that became ResApp Health (ASX:RAP) and Oncosil Medical (ASX:OSL).
Leedman explained his interest in NGS in an interview with Stockhead in August.
“As the chairman of the board, Brian Leedman is involved in many aspects of the business, including strategy and investor relations, and I know how important it is to have someone speaking to investors on a day-in, day-out basis,” said Fendell.
Founding members of the company are directors, including Professor Raanan Shamir who is also NGS’s chief medical officer, and Professor Moshe Phillip its chief scientific officer.
Fendell said the medical and nutritional expertise of its directors and company founders sets the company apart from other companies in its field.
Doctors Phillip and Shamir work at the Schneider Children’s Medical Centre of Israel, the country’s largest paediatric hospital.
They developed ‘Healthy Height’ through their extensive research into childhood nutrition and its effect on height growth.
This article was developed in collaboration with Nutritional Growth Solutions, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.