By Brenna Hughes Neghaiwi
VEVEY, Switzerland (Reuters) - Nestle, famous for its coffee and chocolate, is stepping up investment in nutritional therapy, a business it believes will eventually generate annual sales of 10 billion Swiss francs ($10.5 billion).
Greg Behar, chief executive of Nestle Health Science, told Reuters that the unit formed in 2011 already had revenue of more than 2 billion francs and there were major opportunities both in the new-product pipeline and in geographic expansion.
"Most of the emerging markets are offering amazing growth opportunities," he said.
Behar, who worked for drugmakers Novartis and Boehringer Ingelheim before heading the new Nestle unit, is forging a new kind business that is midway between food and pharmaceuticals.
The goal is to find novel ways to treat and prevent different types of diseases using nutritional approaches, from gastrointestinal problems to Alzheimer's.
It is a bold move by the world's largest packaged food company and requires Nestle to engage in discussions with regulators such as the U.S. Food and Drug Administration (FDA), which Behar said were going well.
"The FDA wants to bring innovation to the market. They see the health value of our products and we're having very constructive discussions with them," he said in an interview after Nestle reported nine-months results. [ID:nL8N12G0CC]
"They see us as a partner that can help shape this area and this regulatory framework."
Currently, Nestle Health Science has around 40 different projects underway and Behar said: "We think we can do more."
He believes there is a clear opportunity to fill a gap between the traditional pharmaceutical and food industries, given ageing populations around the world and spiralling cases of lifestyle diseases.
STRATEGIC HEDGE
Strategically, the shift towards health offers Nestle a hedge against slowing growth in packaged foods by opening up a profitable new area. It is also a counter to crackdowns on unhealthy foods blamed for obesity and other lifestyle problems.
At present, Nestle Health Science margins are in line with the group average but Behar said his vision was for the division to be "significantly accretive" in the long term as its profit margins increase to above the group average.
Nestle has recently been stepping up spending in the space through acquisitions and collaborations. Last week it also announced plans to invest $70 million in a new health science research hub and U.S. headquarters in New Jersey.
"We will continue accelerating our external innovation," Behar said, adding that deals could be both big and small, while the timing of acquisitions would depend on opportunities.
Earlier this year, Nestle invested $65 million in Seres Health, a U.S. start-up company that specialises in restoring the "microbiome", or healthy gut bacteria, and which is developing an experimental treatment for clostridium difficile infection.
It has also acquired or invested in companies working on metabolic disorders, gastroenterology, oncology and Alzheimer's disease.
Last month it signed a deal with Swiss biotech firm AC Immune to develop a simple diagnostic test for Alzheimer's, on the basis that early diagnosis will be critical if targeted nutritional approaches are used in fighting the memory-robbing condition.
As part of its drive to establish itself as science leader in the field, Nestle is hosting a symposium next week in Lausanne on cognition and brain health, with academic speakers from prominent institutions such as the Massachusetts Institute of Technology and Sweden's Karolinska Institute.
($1 = 0.9541 Swiss francs)
(Writing and additional reporting by Ben Hirschler in London; Editing by Mark Potter)
