Nestlé Sets Sights on $15 Billion Medical Foods Sector

Packaged foods giant Nestlé S.A. is expanding its footprint in the global nutrition sector by tapping into the estimated $15 billion market for medical foods—prescription-based powders and drinks intended to meet specific nutritional requirements to treat diseases.

Medical foods are intended for people with chronic diseases rather than for healthy people. They must be used under medical supervision because they are intended to manage serious illnesses, like Alzheimer’s disease and inflammatory bowel disease (IBS). The products have active ingredients derived from food products or dietary ingredients that are generally recognized as safe (GRAS) by FDA.

For Nestlé, the medical foods market has huge potential, amid an aging global population, as the company navigates tougher times in its traditional packaged-food market. Sales of frozen pizza and ice cream have struggled. It has missed its sales-growth target of 5 percent to 6 percent three years running.

“For a long time, nutrition has been seen as a sort of pseudoscience," said Ed Baetge, head of Nestlé’s Institute of Health Science (NIHS). “For many conditions like age-related dementia, for example, there is a major clinical need for new approaches, and where food can make a big difference."

Currently, scientists at Nestlé’s Institute of Health Science (NIHS) in Lausanne, Switzerland, are analyzing human DNA to develop personalized programs for conditions like epilepsy and intestinal disorders that are tailored to specific genetic profiles. Armed with this knowledge, the scientists will develop medical foods containing natural compounds extracted from foodstuffs like tomatoes, coffee and grapes.

NIHS was established five years ago and has spent half of its US$500-million budget, which runs to 2021, although it has projects that extend beyond then. Nestlé also has been on a U.S.-focused acquisition spree. Earlier this year the company signed a deal to help U.S. biotech company Seres Therapeutics Inc. develop products aimed at restoring bacteriological balance in the digestive system. It also bought a stake in Pronutria Biosciences Inc., a Cambridge, Mass., startup developing amino acid-based products to treat muscle loss.

“We want to have a significant impact on the company’s overall profitability over the long term," said Greg Behar, who heads Nestlé’s Health Science business, which markets products developed from findings at the institute’s labs.

Analysts are generally upbeat about the potential of Nestlé’s health business, which also includes nutritional supplements and foods for people after surgery, saying it grew faster than the rest of the company’s operations in 2015 to post sales of about US$2.1 billion. Nestlé aims to increase that amount to 10 billion francs in the next few years.

Although medical foods don’t need premarket review and approvals like drugs, they must be based on what Nestlé calls “sound medical and nutritional principles," and the FDA subjects them to monitoring.

Nestlé said that before market introduction, studies must be conducted showing that its products are safe, beneficial and effective in meeting the nutritional requirements of patients.

In addition, some of its products, like one being developed to help remission of inflammatory bowel disease, are being developed through the conventional trials process.

“It is very important for us to have clinical evidence," said Nestlé Health Science spokeswoman Marie-Françoise Rütimeyer.