ChromaDex Corporation
Q1 2017 Earnings Call Transcript

Published: 12 May 2017

[Operator:]

Ladies and gentlemen thank you for standing by and welcome to the ChromaDex Corporation’s First Quarter 2017 Earnings Conference Call. My name is Karen, and I’ll be the conference operator today. At this time, all participants are in listen-only mode and as a reminder this conference call is being recorded. This afternoon ChromaDex issued a news release announcing the Company's financial results for the first quarter 2017 and filed their form 10-Q. If you have not reviewed this information both are available within the Investor Relations section of ChromaDex’s website at chromadex.com and the form 10-K is also available on the SEC’s website. I would now like turn the conference call over to Andrew Johnson, Director of Investor Relations. Please go ahead.

[Andrew Johnson:]

Thank you, Karen. Good afternoon and welcome to ChromaDex Corporations' first quarter 2017 results conference call. With us today are ChromaDex’s Founder and Chief Executive Officer, Frank Jaksch, Chief Strategy Officer, Rob Fried and Chief Financial Officer Tom Varvaro. Today's conference call may include forward-looking statements, including statements related to ChromaDex's research and developments and clinical trial plans, future financial results, business development opportunities, future cash needs, ChromaDex’s operating performance in the future, future investor interest and analyst coverage of ChromaDex, the markets ChromaDex’s products will address and expected revenue growth of ChromaDex’s products that are subject to risks and uncertainties relating to ChromaDex’s future business prospects and opportunities, as well as anticipated results of operations. Forward-looking statements represent only the Company's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward looking statements relate to matters that have not yet occurred, these statements are inherently subject to risk and uncertainties. Many factors could cause ChromaDex’s actual activities or results to differ materially from these activities and results anticipated in forward-looking statements. These risk factors include those contained in ChromaDex’s annual report on Form 10-K most recently filed with the SEC. Please note that the Company assumes no obligation to update any forward-looking statements after the date of this conference call to conform with the forward-looking statements actual results or to its changes and expectations. In addition, certain of the financial information presented in this call references non-GAAP financial measures. The Company's earnings release which was issued this afternoon is available on the Company's website presents reconciliations to the appropriate GAAP measures, and an explanation why the Company believes such non-GAAP financial measures are useful to investors. Finally, this conference call is being recorded via webcast. The webcast will be available at the Investor Relations section of our website at www.ChromaDex.com. With that, it is now my pleasure to turn over the call to Frank Jacks

[Frank Jaksch:]

Good afternoon, everyone. Welcome to the ChromaDex’s our first quarter call. We have made significant progress in the first few months of 2017. We welcome Rob Fried to the ChromaDex’s management team, as President and Chief Strategy Officer. Through the acquisition of Healthspan Research and TRU NIAGEN we are now selling a NIAGEN product direct to the consumer. As a result, we have begun the process of improving the distribution pipeline for NIAGEN and we believe it is an important step in optimizing the tremendous opportunity we have with NIAGEN. Two weeks ago we announced an important new strategic investor in ChromaDex and we are very pleased to see that our investors in the market is responded favourably to that announcement. These are all very important moves for ChromaDex in maximizing value for NIAGEN and ChromaDex. In the first quarter, we generated $4.4 million of revenue, down from $7.3 million last year. However, it is important to understand that we terminated the agreement of one customer who represented nearly 50% of Q1, 2016 ingredient sales. Ultimately the value in NIAGEN will come from the body of peer reviewed published preclinical and clinical research validating NRs impact on the way we age. We've been very active over the past three years working and developing the science and research validating the importance of NIAGEN as an effective NAD precursor. We now have over 100 collaborative agreements in place for NIAGEN with highly prestigious universities and research institutes all over the world. For those of you who may not - formally a great outcome would it be to have five or six such collaboration. So having over a 103 years is pretty incredible validation of how important NIAGEN really is. Many of the preclinical animal studies that have started over the past two or three years have now transitioned to human - actual human clinical trials. As I highlighted in my February letter to shareholders, there are currently 12 human clinical trial - clinical studies on nicotinamide riboside that are in various phases that can be found on the website clinical trials.gov. We expect additional clinical studies to be added to this list during 2017. ChromaDex is second study with KGK, a 140 person trial that will evaluate the effect of repeat doses of NIAGEN on NAD metabolic concentrations in blood, urine and muscle in healthy adults, is a study that will evaluate the impacts of three dose levels of NIAGEN compared to a placebo. The recruitment and dosing portions of the trial have now been completed and we're now finalizing the analysis of the data of this trial and we are working on the timing of a top one - the timing of the release of that top line data, which we expect to report sometime in Q2 or Q3. The other study I like to highlight is the University of Colorado trial. This study is assessed the efficacy of supplementation with NR for improving physiology and vascular function in healthy middle aged and older adults. This trial has been completed and a manuscript summarizing the study is being prepared for presentation at a technical conference, as well as a submission to a peer reviewed journal. We continue significant progress on our first drug development opportunities for nicotinamide riboside. We completed our first pre-IND meeting with the US FDA back in November of 2016. During that meeting ChromaDex and the FDA discussed the developmental – the developmental plan for nicotinamide riboside for Cockayne Syndrome, which is a rear pediatric orphan disease that results in significantly shortened lifespan in affected children. We have completed an additional animal study and we are now preparing to go back to the FDA for a follow up meeting. In February, we announced that the University of Iowa researchers have published an animal study on NR and the prestigious journal, The Journal of International Association for the Study of Pain or the journal pain revealing that NR is an effective tool in relieving chemotherapeutic to induce peripheral neuropathy or CIPN associated with the treatment of common anti-cancer agent paclitaxel. As the American Society of Clinical Oncology has issued a position paper that there is an unmet need for treatments that can alleviate CIPN. I believe that's an important - it's very important for us as this has a potential to be a very significant business opportunity for NIAGEN. We are currently collaborating with the University of Iowa in filing an IND for the treatment of CIPN and with NR, which required to start and NIH funded clinical trial. The number of studies of NIAGEN showing positive effects are approaching an inflection point with peer reviewed published pre-clinical data are likely to result in additional commercial opportunities for NIAGEN. All indications point to 2017 being both a pivotal and validating year for ChromaDex’s pre-clinical and clinical research continues to publish business development becomes realized and pharmaceutical clinical trials begin. We believe positive data for both human and animal studies will deepen the validation of NIAGEN and safety, function, applications and efficacy and become the primary driver and ChromaDex striking business development deals and substantial revenue opportunity with large consumer product companies. Recently we announced an investment led by Mr. Li Ka-Shing and the team at Horizon's Ventures. Mr. Li and Horizon's Ventures are very accomplished strategic investors that see the category of healthy aging as an emerging high growth opportunity. We've closed the initial tranche of a private placement of $3.5 million which was announced on Thursday April 27th and we are now working on closing the second tranche which we are expecting to close sometime over the next one to two weeks. We'd look to partner with them and their portfolio companies to distribute NIAGEN globally. We have also been actively engaged with numerous large multinational consumer product companies with respect to commercial licensing opportunities for NIAGEN being included and featured in a number of branded consumer products within a large product category such as food, beverage, infant nutrition, medical or clinical nutrition, skin care and also animal health. A new vitamin or ingredient of this magnitude doesn't come along that often and NIAGEN has the potential to be perhaps the largest nutritional ingredient ever. And because of this, we need to focus our strategy on the tremendous opportunity we have with NIAGEN. With that, I'll turn the call over to Rob Fried to discuss our strategy.

[Rob Fried:]

Thank you, Frank. The science is indicating that NIAGEN has a positive impact on the way our cells metabolize energy and therefore how we age and that is a significant opportunity of which ChromaDex plans to take full advantage. Our mission going forward will be to solve the problem of ageing. Our strategy will be to focus initially on NAD precursors and NIAGEN in particular. The NIAGEN game plan will have three tiers. First, we’ll have a targeted tactical pharmaceutical initiative focusing on orphan diseases and partnering with established pharmaceutical entities. Second, we will work with a few of the world best food and consumer products companies to include NIAGEN in selected products and markets worldwide. And third, most importantly we will operate in the supplement space, as a vertically integrated manufacturer and distributor of our own in-house consumer brand. TRU NIAGEN in the name of our in-house brand presently, TRU NIAGEN. In the coming months we will dramatically reduce the number of companies selling NIAGEN. We will also launch a campaign focusing on the importance of NAD levels for healthy aging and NIAGEN is the safest and most efficient way to increase NAD. We believe there are times when a small step backward can yield many leaps forward. We recognize the importance of the opportunity with NIAGEN and are taking steps to ensure that it is well managed for many years to come. And with that, I will turn the call Tom to discuss the Q1 2017 financial results. Tom?

[Tom Varvaro:]

Thank you, Rob. And good afternoon, everyone. For the three months ended April 1 2017 or Q1 2017, ChromaDex reported net sales of $4.4 million, as compared to $7.3 million for the quarter ended April 2, 2016 or Q1 2016. The ingredient segment generated net sales of $2.1 million during Q1, 2017, as compared to $4.6 million for Q1 2016. Our core standards in service segment generated net sales of $2.4 million for Q1 2017, as compared to $2.7 million for Q1 2016. Gross margin for the quarter was 39% versus 47% for Q1 2016. The net loss attributed to common stockholders for Q1 2017 was $1.9 billion or $0.05 per share, as compared to a net income of $0.3 million or $0.01 per share for Q1 2016. EBITDA adjusted for non-cash charges associated with share based compensation which is a non-GAAP measure for Q1 2017 was negative $1.4 million, compared to an adjusted EBITDA of $0.9 million for Q1 2016. I next want to highlight some of the expenses incurred in Q1 2017 that were discussed in our recently quarterly report filed with the SEC on Form 10-Q. The company incurred $664,000 in research and development expenses for Q1 2017, an increase of 43% as compared to $464,000 Q1 2016. These charges include human clinical trial fees and new ingredient development costs. The company plans to continue to increase research and development efforts with a focus on the ingredient segment. For Q1 2017, our marketing expense increased to approximately $249,000 versus $76,000 in Q1 2016, as the company began to ramp up marketing efforts across all businesses. For Q1 2017 our legal expenses increased to approximately $432,000 to approximately $12,000 for Q1 2016. This increase is mostly comprised of fees for the ongoing litigation, as well as the acquisition of Healthspan. The company's cash on hand at the end of the quarter was $1.2 million. With that, I will now turn the call back to Frank, so he can wrap up the call.

[Frank Jaksch:]

Thanks, Tom. With that, that will be the wrap up of our Q1 2017 quarterly conference call and we'll open up the floor for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Ram Selvaraju Rodman & Renshaw.

[Unidentified Analyst:]

Hi, there. This is Mitchell on Ram. Thanks for taking my questions. My first question is now that you're in the process of receiving $25 million from Li Ka-Shing, are you exploring any business development opportunities like strategic acquisitions and licensing of new products or collaboration?

[Frank Jaksch:]

Hi. This is Frank. No I wouldn't say that we're looking at strategic acquisitions as part of that process. I mean, I would say that we're looking for more strategic ways of monetizing nicotinamide riboside, international expansion of nicotinamide riboside, as well as a different way of looking at how we're going to capitalize on the market here in the United States. But I wouldn't say it includes anything from an acquisition standpoint.

[Unidentified Analyst:]

Okay. Great. And I just have one more. Could you provide some insight as to why sales were down this quarter and if customer diversification was dramatically changed from the previous quarter, like each customers relative contribution to the revenue mix. And I guess as a two part question, and do you foresee the future growth coming more from existing accounts or new accounts?

[Frank Jaksch:]

I think, well, number one I mean, the biggest hit was regarding the one customer that we talked about both in the call, as well as in the press release is that the loss of the - you know because of the fact that we dropped the one customer from last year that had a significant impact on this quarter versus the same quarter last year. The rest of it was largely just timing of customer - timing of customer orders on our regular NIAGEN and or other ingredient customers. Tom, do you have any other detail to add to that?

[Tom Varvaro:]

No, I think you know further what Frank said, we see the existing customers that had some timing issues you know, Q4 versus Q1, those customers are going to continue to go and add on. But going back to what Rob said on the call as well, we've made a decision with some of our customers to move away from them and reduce the number of customers in the marketplace as well as we move forward with our own strategy.

[Unidentified Analyst:]

Okay. And could you maybe just elaborate a little on that, reducing the customers and kind of like to focus on those?

[Frank Jaksch:]

On that, I mean, I don't think that anything in the first quarter was necessarily reflective of that change. I mean, we added the Healthspan business in Q - at the end of Q1. And you know, now we're looking at that business moving forward. But ultimately I would say it was more just due to timing of customer orders or you know, not just NIAGEN, but all ingredients in Q1 versus Q4 and again that the fact that we dropped our largest customer, we’re in litigation with that one customer right now was probably the single biggest impact on comparing Q1 versus Q1 this year.

[Unidentified Analyst:]

Sure. Thank you so much. I really appreciate that.

[Operator:]

Thank you. And our next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann.

[Jeffrey Cohen:]

Thanks Rob and Tom. Thanks for taking the questions. Can you hear me okay?

[Tom Varvaro:]

Yeah, I can hear you.

[Jeffrey Cohen:]

Wonderful. So I was hoping you could spend a little time and talk a little bit about peripheral neuropathy and perhaps kind of walk us through what you're thinking at this point as far as what type of regimen or what type of dosing may be used and talk about endpoints and what a trial might look like as far as centers and enrolees [ph] and timelines?

[Frank Jaksch:]

Okay. The dosing I think we're still trying to work on with the final dosing for what that - what will be used in the study, but my guess is it's going to be consistent with what you see in a lot of the other clinical trials, for some of those types of types of conditions you're seeing dosing that could be anywhere from 1 gram up to 2 grams. So I would I would expect that is probably going to be somewhere consistent with the other clinical trials that are currently on clinical trials like us [ph] The study that is an - the NIH funded study right now is a two center study and we're proposing to essentially look at sort of I guess like two things. One is what impact you know it's going to have on CIPN, the neuropathy that's caused by paclitaxel treatment, largely is so unbearable in some cases that most of the - about 70% of the participants will basically stop treatment as a result of the neuropathy. So what we're really going to be looking for is whether or not the - we can actually mitigate the neuropathy and then have it show a higher level of people going through the full course of treatment.

[Jeffrey Cohen:]

Okay. For in with paclitaxel or it would start beforehand or it would go on for a particular period of time?

[Frank Jaksch:]

I think we're going to look at both. I think we would like to look at the idea of starting the dose before chemotherapy started and then also concurrent.

[Jeffrey Cohen:]

Wonderful. Okay. Thanks guys for taking the question.

[Operator:]

Thank you. And our next question comes from the line of Bill Dezellem from Tieton Capital Management.

[Bill Dezellem:]

Thank you. I'd like to talk about the change in the retail strategy and would you update us on the process to reduce the number of firms that are retailing NIAGEN, where you are at in, in that progression please?

[Frank Jaksch:]

Rob, do you want to take that?

[Rob Fried:]

No. Go right ahead.

[Frank Jaksch:]

Okay. So I mean, we've already - since the acquisition we've already started the process. So over the past few months we've been in the process of basically whittling down the list of parties, as you guys probably know we've had quite a few that we've added over the past three years since we launched the ingredient. We've had over 40 of these relationships that we've had in place and over the past few years you probably noticed that there's a lot of different products that you can find on the web, just by doing a Google search and there's quite a few products that you'll be able to find if you just went to Amazon. And the market is developed in a way that you know, we have way too many of these guys and you start seeing them competing based on claims that they're making, and they've started competing based on price. And it's largely become an incredibly competitive field just competing for the space of NIAGEN which we have control of, all those guys are NIAGEN, nicotinamide ribosid, but they are not competing in a way that that makes sense for the type of ingredient we have. We have to think about this differently. We're the one developing. We have the intellectual property underlying this. We're the one who's spending money to develop the science through collaborative studies, as well as clinical trials that we're doing on our own and we need to think about this differently in the sense that – and the path has already been shown to us that there are some success in marketing following that strategy with several of our customers that have shown that path. And so clearing the playing field for us to basically to stage for making an investment in our own consumer product brand is a priority for us. And the short answer I'll give you is that we're - we are clearing the playing field right now, and we expect it to be substantially cleared as the rest of this year progresses and we expect a lot of it to be cleared by the end of the year.

[Bill Dezellem:]

And what are you anticipating in terms of hiccups as you go along through the process, where some of these firms that you are going to no longer sell to and that they won't be ordering, but there still will be product on the shelves et cetera. How are you thinking about that and are you managing that in any way?

[Frank Jaksch:]

Yes. I mean, there's a couple different paths, I mean, most of them will eventually run out of inventory, but there's also the possibility that you know we may be able to clear it by you know potentially even just taking some of the inventory, taking some of that inventory on our own and just removing it, so that we can clear the path in a more efficient way and we're evaluating several different ways. But I don't I don't foresee that it's going to be you know going out for a long period of time we're going to see a lot of inventory out there.

[Bill Dezellem:]

That's helpful, Frank. And then one additional question in this same vein, is how much are you anticipating that your sales and marketing expenses will be increasing as you become the primary retailer of NIAGEN?

[Frank Jaksch:]

Well, I mean it's a different strategy in terms of marketing a consumer product. So Rob, do you want to pick up on that?

[Rob Fried:]

Yes I understand the question you're asking, how would our marketing expenses and our revenue be affected by the transition from being a wholesaler to a retailer.

[Bill Dezellem:]

That's correct. That’s absolutely correct.

[Rob Fried:]

I don't expect in 2017 there will be a dramatic change in revenue from the transition and that's mostly because the larger sellers will continue to be selling for the balance of the year and perhaps beyond that depending on how the relationships go in the coming months. But I expect towards the end of the year and then into 2018 to see some dramatic increases in revenue as a result of our own distribution. We think that there is somewhere between maybe $60 million to $80 million of retail sales of NIAGEN that took place in 2016, retail sales. That's not our wholesale, so that's retail sales. We expect a significant portion of that - and that market went from zero 3 years ago to that level, you know, just three years. The demand for NIAGEN is very, very strong. There is a lot of repeat ordering of NIAGEN, people who buy it tend to buy it again, because if they take it for two months or three months they start to notice impacts and then they stay with it. And then the general consumer awareness of NAD precursors and NIAGEN [ph] and NAD as a means to manage energy metabolism and perhaps ageing itself is growing in general awareness. So consumer demand is strong but growing dramatically. We expect that during this pivot, during this transition in the coming months that a significant portion is not most of that revenue is going to come to us directly. And of course the margins are - the gross margins are far better when we sell our own brand. The customer acquisition costs, this is an answer to your marketing question. The customer acquisition cost for all of the retailers presently selling NIAGEN is quite high. The reason why it's quite high is because there's 40 people selling it and they're competing over you know, limited shelf space on Facebook or on Google or with the affiliate networks and therefore you're seeing lots of competition in customer acquisition. Retention tends to be pretty good. But the customer acquisition costs are relatively high. Lifetime value is pretty strong though because of what I said before, reorders are very good. But as we change the landscape out there and we swim out from what is presently a very competitive red ocean to a more bluer ocean. We think customer acquisition costs are going down and we think they'll come down dramatically, especially as general public awareness of NIAGEN increases and retention will go up. So that's not a numerical answer to your marketing question. There will be an increase in marketing costs, but we think that we can manage this in such a way demand - the way we see the marketplace, we see it as being a very profitable endeavour, and very early. There is already established demand. There's already a clear product market fit. We just have to change the competitive landscape. We think margins will be excellent. We think customer acquisition costs will be good, lifetime value will be good. So yes, it will be an increasing marketing cost, but we expect to see a return very quickly.

[Bill Dezellem:]

That's helpful. Do you anticipate - let me actually step back to the increase in marketing cost. Would you expect those to start stepping up this year or would you expect that more to be a next year phenomenon as the number of sellers is cleared?

[Rob Fried:]

I expect it could be dramatic next year, but I expect there to be an increase this year in the millions this year.

[Bill Dezellem:]

In the multiple millions of increase this year?

[Rob Fried:]

Yes, on the low end, but yes.

[Bill Dezellem:]

Okay, great. Thank you. And then do you anticipate keeping a group of retailers that agrees to and adheres to the concept of selling based off of the science and not on price. Is that something that you're having discussions with some of the more prominent sellers or how are you thinking about that?

[Rob Fried:]

Right. We are open to that, is the most that we can say right now.

[Bill Dezellem:]

Thank you, both.

[Operator:]

Thank you. And our next question comes from the line of Howard Horberg from Horberg Enterprises. Your line is open

[Howard Horberg:]

Hey, guys. I do wish indeed we had the sales revenue number, but I do know that that's a minor part of the future of this company. I do want to focus on something that I'm trying to put my arms around, my head around and that is the strategic investment by Mr. Li is so impressive to me as I've done my research and like Carl Icahn and Peter Thiel, he doesn't invest unless he he's looking for 10 or 20x. 2060 cents [ph] times 10 is $26 a share. I'm a long-term believer in this company and I never thought $26 was possible. I do think there is a lot of value in or under value. Frank, please tell me where this value is coming from and is the reason we're trading at such a big discount the fact that people think all of our eggs are in one basket NIAGEN?

[Frank Jaksch:]

Well, all of our eggs are not in one basket with NIAGEN, like we just do, like Ron described on the call, it's yes, NIAGEN is probably the biggest opportunity we have as an ingredient. And as you probably get from the call, we are going to be focusing pretty heavily on NIAGEN as ingredient technology. We have a substantial patent portfolio underlying in protecting it and we have multiple different ways. And Rob outlined sort of three pillars that we're going to be focusing on. We have the pharmaceutical opportunities that we're working on developing with nicotinamide riboside, but that that's one area that I think could be a $1 billion opportunity for us. We're working on licensing deals to monetize other areas beyond the supplements space, food, beverage, infant nutrition, skin care. That's another area that could be substantial for us in terms of monetizing nicotinamide riboside. And we also have the third area which is the you know, what will be the direct to consumer, the dietary supplement business that we're going to be able to go after as well. So you know, I think we've got three substantial opportunities for monetizing the opportunity that we have. And I've been talking about the size of the market that we have, the sciences continuing to validate the effectiveness of nicotinamide riboside. The clinical data is stacked up and we have 12 studies that are currently listed, we expect more of those studies to continue to come. And we expect those studies to continue to validate. They are already fairly impressive list of animal studies that we have out there and all of those together are really what creates the $1billion opportunity we have with nicotinamide riboside.

[Howard Horberg:]

Okay. Is it is it fair to say that if one of the studies were to fail such as someone thinks it prevents Parkinson's. If another one succeeds, what kind of value would that have, like any individual benefit that NIAGEN has?

[Frank Jaksch:]

Yeah, I mean, that's the whole point of what I've been saying about the three different areas that we can - so we can monetize and it's not like a pharmaceutical company with one drug in the clinic, that all - everything is a binary decision based on the outcome of that one result. We don't have that here. So you know, we've had success with most of the studies that have come out so far and that's been great. And but we don't need to have success with every study that's going to come out, because ultimately we're going to be able to cover it – this broadly. So it's not an all eggs in one basket, going back to what I said from the very beginning, I mean, there's a lot of different ways for us to monetize this. The value of the compounds is there and you know, we're going to prove that not only in science, but we're also going to prove it in monetising or the activity that we're going to be showing in all three of these pillars.

[Howard Horberg:]

Understood. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Michael Kay with Kay Associates.

[Michael Kay:]

Yes. I have a few questions. The last few conference calls, if one listens to them they would think that the only product that the company has is NIAGEN. What in the world happened to Taro's [ph] still buying, previous in the past you gave a great deal of publicity to this substance from blueberries and I see the studies are accumulating indicating its efficacy for various types of situations, what about the other, the yellow corn study and some of the others, the Rite [ph] study. In other words it seems to me you give the impression that you're not doing anything with these other ingredients that you developed and everything is NIAGEN, NIAGEN, NIAGEN which is nice, but would you comment on that. I mean how come no mention of Taro's still being in these other?

[Frank Jaksch:]

Well, I mean, look all – the Taro’s still being a strong and important ingredient for us. It's just – and Taro is still being continues to grow. But it's not a focus right now in the sense that nicotinamide riboside is a star ingredient that you know, you don't get opportunities like this. So I think the best thing we can do is focus on the one thing that has the biggest potential for the company. The other ones are going to continue to go. We continue to launch new ingredients. We launched the purple corn, anthocyanin product last year and the business model that we have on how we find ingredients continues to work very well. We are we are evaluating new technologies. We are licensing new stuff and we are putting other things into the developmental track. But you know, the best thing we can do right now is to keep a clear focus on nicotinamide riboside, because the way it's going right now I think it would - it's clearly in the best interest not only of shareholders but also in the company to keep focusing on that. But all the other - the other things will continue to develop and the mechanism that we have for finding new ingredients continues to work.

[Michael Kay:]

Okay. And the other thing is, if you could clarify the company's intention is not to allow companies like Gero, Life Extension, Thorne which currently sell supplements of NIAGEN combined with other substances like was resveratrol or pterostilbene, the company's desire is not to allow those companies to continue to be able to sell NIAGEN and you only want consumers to be able to get it from Healthspan under the name through NIAGEN, is that correct?

[Frank Jaksch:]

I mean, I can – Rob answer the question in one of the previous ones, is that we're currently evaluating whether you know, whether we're going to work with other parties and we're not prepared to comment quite yet on exactly what we're going to do, but we are going to look at those other relationships as we move forward with our own strategy. Rob, do you have anything to add to that?

[Rob Fried:]

I don't. I know that...

[Michael Kay:]

You know, I think this should be thought out very carefully because you know the company had a very bad experience when they tried to get into the retail business a few years ago and that turned out to be you know, a virtual disaster. And one of the advantages of allowing a large number of companies to market and sell NIAGEN in various a loner and various combinations is that they then incur - they pay for a great deal of publicity about the product. You know, you could read about it in magazines in their literature. And the other concern is, right now I paid $44 for the TRU NIAGEN, I think it was 60. And that's quite expensive, especially since you know, people really need to get 250 or even 500 milligrams to get an effect that seems, you know, what the studies indicate. So aren’t you going to - isn't the price going to be exceedingly high limiting the number of people that could purchase NIAGEN, if you only - if you have a monopoly on it?

[Rob Fried:]

This is Rob. Frank, do you like me to address...

[Frank Jaksch:]

Yes, go ahead.

[Rob Fried:]

This is also in response to some of perhaps your previous questions, which is science has understood the importance of nicotinamide adenine di-nucleotide for many, many decades. We understand that that is probably the most important metabolite in our body. And we understand the importance of increased ATP energy levels and its impact on helping the body to heal mutations and diseases and stress conditions related to energy metabolism. When you add all those things up it tends to flatter up all the conditions that we associate with age. Combine that with the fact that ChromaDex has put a very, very strong patent portfolio together around nicotinamide riboside and it represents an opportunity that's not big, it's extremely big because you have a compound here that has an impact on the way we age, that we can perhaps be helpful to the general public and general public as they grow older and losing less of the function that we tend to associate with age, and that's an important public good. But it also represents a very, very, very significant opportunity. If we have 170 million people presently buying supplements in America and who knows the actual number worldwide, there is a percentage of that community that would be interested in a safe compound which is derived from milk. Look the thing that moms get to their kids milk, the elixir that has exist in a high concentration in human vestigial [ph] There is a percentage of the population that would be interested in taking that compound, it has a positive effect. The market opportunity is not a market opportunity, one thing compared to pterostilbene. The market opportunity is quite, quite significant and it’s just about managing it properly. We are appreciative of those retail customers with whom we work, who do a good job, who represent the science properly, whose distribution clients is responsible or able to price it appropriately, generate a profit who are healthy well-run companies. And we are open to having conversations with those, presently though there are too many companies misrepresenting the science, misrepresenting the benefits and presenting it in a manner that makes the ingredient look more common than indeed it is. It's a very rare and unique compound, a very rare and unique opportunity. We are going to price it in a way that is consumer friendly but not inexpensive. That's my answer to your question, I hope it's helpful.

[Michael Kay:]

Well, it's somewhat helpful, but I guess time will tell. Because you know, we'll see what happens. I hope things turn out well for consumers, as well as for the company of course.

[Operator:]

Thank you. And our final question for today comes from the line of Brant Snelson, a Private Investor.

[Brant Snelson:]

Yes. Thank you. First of all, I am a long term investor and I have lost a lot of money on the stock and this company and shame on me I guess. But with that said, it's same old, same old and I just don't like what I'm hearing here gentlemen. Hear the word perhaps, I hear that. We have too many customers yet our sales go down significantly. It doesn't seem to be a conviction there, it doesn't seem the execution. So to aside from all that, as an investor, I really have concerns about integrity. I mean, not too long ago we went from 6 bucks to seem like 2 bucks overnight, so my rights and article, boom. Today pre-market it’s down 5%, aftermarket last time I looked on the road here 9%, 10% down. I think, Frank you and the team want us to consider resigning here. I mean, I'm really upset. I can't believe some of things I'm hearing and all this great potential, but you haven't delivered. So I'll listen to your responses one more time. But hopefully I hear something different than I've heard the last number of years and different from what's on this conference call. And the one gentleman saying hey, what's important is long-term, yes, long-term is important. So you still got to hit the numbers when the stock is going down like it has. And we all get burnt what we have. It's disheartening, it's disappointing and I question that may the games being played. And I know your response, in fact I'd like to hear it? Thank you.

[Frank Jaksch:]

I'm not sure there was a question in there, but I mean, in responding to what you're saying I mean, we started this thing three years ago from really it was just the very beginning. So we're only three years into a strategy on what is effectively a new compound. And you know I don't know what your expectations are, but I mean, ultimately you know developing a compound, developing the science underlying it, the fact that we didn't even have our first clinical trial published until the end of last year which was the first one. It takes some while to get these things going and if you listen to previous calls and you listen to the messaging that the company has been putting out even since last year, we've been pretty consistent in saying that we need the scientific story to develop to get to the point where we have a story to go out and really start to tell that story. And last year I said that this year was going to be the year we were going to start getting the science we needed to start telling that story. We are starting to get that data and it starting to publish. We have the collaborative studies underway that we need to build the underlying story. And going out and going out too fast would be premature. There is been plenty of examples of other companies that have come out with or other ingredients that have come out prematurely with those stories. We don't want to make those mistakes.

[Brant Snelson:]

Frank, you just say for the customers, right?

[Frank Jaksch:]

Yes.

[Brant Snelson:]

Okay. And you got to reduce the number of those customers?

[Frank Jaksch:]

Correct.

[Brant Snelson:]

Okay. And sales are down significantly? Are you Frank - can you honestly say that you're pleased with the performance of your company and your staff?

[Frank Jaksch:]

I already answered that question. I mean, look we need to focus on what we need to focus on. The biggest thing that we had from Q over Q was largely associated with the dropping of the one customer that we had.

[Brant Snelson:]

Mistakes been made you know, and we move on. But a lot of work has to be done. I'll leave it at that. Thank you.

[Operator:]

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to ChromaDex for any closing comments.

[Frank Jaksch:]

Thanks everyone for joining today and you know I look forward to continuing to message and tell everybody about the progress that we're making in terms of the plans and what we talked about today. And you know with that, I'll wrap up the call.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. And you may now disconnect. Everyone have a great day.