BioGaia eyes international probiotic growth despite EMEA dip

27 Mar 2020 --- Africa could become the next major growth market for BioGaia’s probiotics, according to the Swedish biotech firm’s 2019 annual review. The company notes that the US was its largest market for the first time last year, while China saw the biggest sales increase. However, BioGaia, which highlights Paediatrics as its largest segment, reports that a change in agreement with Nestlé led to a major drop in its royalty revenues, with EMEA sales falling 9 percent.

“Research on the microbiota is exploding and it is within this area that many ideas for the future are found. We also see that both healthcare professionals, as well as consumers, pay more attention to this field of research. Probiotics are convenient to buy online, and consumers are increasingly looking for convenience,” Isabelle Ducellier, President and CEO, tells NutritionInsight.

“Despite substantial investments in marketing and research, BioGaia continues to be a highly profitable company with good liquidity, favorable sales growth for the product portfolio and lack of debt. We continuously develop new products that complement our range as well as within totally new indication areas. A strong pipeline combined with good growth for our existing product range, guarantees a continued positive development for BioGaia’s shareholders,” says Peter Rothschild, Board Chairman of BioGaia.

Consolidated net sales totalled SEK 768.3 million (US$75.6 million), an increase of 4 percent. This lower revenue increase is primarily due to reduced royalty revenues from Nestlé Product sales. Revenue royalties from the sale of Growing Up Milk with Lactobacillus reuteri Protectis for children over the age of one decreased by SEK 45.8 million (US$4.5 million). The company explains that this is due to the 2018 expiration of the company’s royalty agreement with Nestlé. 

The renegotiated agreement restricts the number of markets. Additionally, sales in EMEA – the company’s biggest market – were down 9 percent to SEK 399.6 million (US$39.3 million). 

However, sales in the Adult Health segment increased by 19 percent to SEK 167.4 million (US$16.5 million), including foreign exchange effects. BioGaia states that it is well-positioned for growth with products in gut, oral and bone health. Additionally, applications are likely to increase as research within new areas is established. 

Other sales amounted to SEK 900,000 (US$89,010), a decrease of SEK 2.8 million (US$270,000) compared to 2018. Sales increased by 36 percent to SEK 177.0 million (US$11.5 million) in APAC, which the company says was driven by strong sales in Japan in the first half, and increased sales of Protectis drops, especially in Japan. Meanwhile, in the Americas, sales went up 10 percent to SEK 191.8 million (US$18.8 million).

While Africa is currently a small market for BioGaia, it may become a major growth market. A regional approach
The company’s products are sold in 107 countries and the level of acceptance towards probiotics differ in different parts of the world. “In the US they are a commodity, whereas they are still quite unknown in India, for example. However, there is a global trend toward increased consumer interest in probiotics,” notes Ducellier. 

Looking toward new potential markets, Rothschild observes that while Africa is currently a small market for BioGaia, it may become a major growth market. “We, therefore, want to be there from an early stage and are looking to broaden our presence on this continent,” he states. 

Meanwhile, the company is seeing strong growth in Asia, especially Japan. The country is notably BioGaia’s largest market for oral health products. The company is focused on achieving better market coverage and has visited local dental clinics in the country to learn how the products are used in parallel with its own sales force. 

“We must not forget that this growth is the result of a long-term focus, which after a number of loss-making years is now yielding good results. The Board has continually monitored this performance and, despite earlier losses, has supported management’s investment in the Japanese market and now also in the sales hub we are building up in Singapore, where staff will cover the other markets in Asia,” continues Rothschild. 

In Latin America, intensified competition – in Brazil especially – did not stop the company’s growth. “To meet this competition, we are broadening the market through launches, including Protectis vitamin D drops, Gastrus and Prodentis. We are also intensifying our support to our partners, with marketing material aimed at both doctors and consumers,” says Cristián Contreras, Regional Director Americas.

Meanwhile, the positive performance in the US was driven by the company’s online sales under the BioGaia brand and by new product launches under the Gerber brand. “However, in the US, many probiotics are marketed with bold claims that are not backed by science. This has generated some bad press and somewhat damaged the industry. We only sell products that have scientific evidence. We have always had this approach and are convinced it is the right track,” details Ducellier. 

The 2018 expiration of the company’s royalty agreement with Nestlé affected revenue. Meanwhile, EMEA has around 52 percent of the company’s total sales. France saw the biggest sales increase, although Spain and Italy also had positive sales development. “In EMEA, we have a leading position in the Paediatrics segment. During the year drops, tablets and powder products for children accounted for over 86 percent of total sales in EMEA. Our goal is to retain this position at the same time as we want to grow and reach new target groups through launches in the Adult Health segment in both new and existing markets,” says Ana Pérez Sanz, Regional Director EMEA.

An uncertain future
The company also has 50 clinical studies underway and is anticipating seeing the results in the year above. Last year, it published a study within a totally new area for BioGaia, diverticulitis. The results offer new opportunities for improved care for people who suffer from these intestinal problems and it is now developing a commercial product. 

Ducellier states that during these times, humility is needed as it is very difficult to predict the year. “As we speak, BioGaia is not particularly affected by COVID-19. While sales are up, we see some challenges in logistics.” Earlier this month, PharmaLinea Founder Blaž Gorjup also told NutritionInsight that although new product launches are on hold due to the severity of the situation, the supplement market is still seeing a boost in sales.

“2020 is a year that started with unease and uncertainty. We are closely following global developments related to the coronavirus. At the same time, 2020 is the year we celebrate BioGaia’s 30th anniversary. We do this with both pride in what we have achieved and high ambitions for the future,” Ducellier concludes.

Edited by Katherine Durrell