Magical or Overrated? A Food Additive in a Swirl

NYTimes.com
By GARY RIVLIN


IT is not easy working inside Martek Biosciences, which has been trying for years to persuade food makers to add an omega-3 fat found in algae to everything from cheese puffs to cornflakes.

“There have been a lot of days where we ask ourselves if we’re crazy,” said Steve Dubin, the company’s chief executive. “You look at yourself in the mirror and have to ask, ‘Is the rest of the world not getting it, or are we the ones out of touch with reality?’ ”

Of course, Martek has concluded that the rest of the world doesn’t get it.

The company, which is based here, between Baltimore and Washington, says it has made that most magical of food discoveries: an essential nutrient that can be added invisibly to the diet without any appreciable impact on taste or eating habits.

Martek has had considerable success adding an omega-3 fatty acid called docosahexaenoic acid, or DHA, to infant formula. And, on paper at least, DHA also sounds like the perfect supplement for Americans, who seem to grow more obsessed with healthy eating the more poorly they eat.

If food makers would only sprinkle some DHA into everything from the milk people put in their coffee each morning to the chocolate bars they snack on at night, Martek’s scientists say, consumers would end up with healthier hearts, sharper minds and better vision.

But the country’s big food companies have not exactly embraced DHA the way that Martek executives figured they would — or should. For several years, the company has spent hundreds of millions of dollars increasing its production capacity in anticipation of a deluge of orders that have yet to materialize.

Makers of infant formula are buying DHA in bulk, but last year Martek booked barely $500,000 in sales to food companies. The company’s stock closed at $24.17 a share on Friday, down 66 percent from its high of $70.99 in May 2004.

Competition is one reason that Martek’s DHA has not emerged as the new calcium, which food makers have long sprinkled into various products from orange juice to cereal. (As a result, the average American consumes more calcium, crucial to bone strength, than in the past.) Fish oil companies also sell omega-3 fatty acids, as a food additive or in gel capsules (Martek sells gel cap versions of its product as well). They promote their products as cheaper, more magical elixirs that are superior to DHA because they also have a second important omega-3 called eicosapentaenoic acid, or EPA.

There are questions about the supposed benefits of DHA, whether it is derived from algae or anchovies. The Food and Drug Administration has declared DHA safe, but some nutritionists question the sweeping health claims promoted by Martek and others that sell omega-3s.

“A lot of the claims made for DHA are in the realm of hypotheses,” said David Schardt, senior nutritionist at the Center for Science in the Public Interest, an advocacy organization based in Washington. “They are certainly worth pursuing, but there’s not yet enough proof to warrant telling people to go out of their way to take DHA.”

The exceptions, Mr. Schardt said, are people with a history of heart disease and premature infants, who need an extra boost of DHA for proper brain and eye development to compensate for their early exit from the womb.

Martek’s scientists, when pressed, generally agreed with Mr. Schardt. The data showing any health benefits of DHA beyond those related to the heart or premature infants, while encouraging, is not quite conclusive, they say.

Research has suggested that DHA may reduce the risks of Alzheimer’s, for instance, but years more study is needed, they say, before any definitive claims can be made.

Yet that has not stopped the company’s top executives from promoting DHA’s potential health benefits more broadly. “If you have a product that reduces your chance of Alzheimer’s,” Mr. Dubin said, “if it improves your cardiovascular, if it improves your eyesight, if it improves the health of your baby, then I have to think consumers will say that’s worth an extra 25 or 50 cents a day for these benefits.”

He may be right. After all, this is a country where people concerned about their cholesterol will cut their egg intake in half but then consume four times as many servings of a fat-rich superpremium ice cream. Our tortured relationship to food might just help Martek’s cause.

“My experience in nutrition is that single nutrients rarely produce miracles,” said Marion Nestle, a professor in the department of nutrition, food studies and public health at New York University and the author of “What to Eat,” published last year. “But it’s also been my experience that companies will put anything in their food if they think the extra marketing hype will help them sell more of it.”

For a long time, the typical American diet contained plenty of omega-3, DHA included. But that was when cattle were not trapped in pens and actually roamed the prairies and grazed on grass, which is a good source of omega-3s, rather than eating feed-lot corn and soy, which are not. Eggs, too, used to be a strong source, but chickens have undergone a similar lifestyle change.

Wild salmon is still a terrific source of omega-3s, as are fatty fish generally, but most Americans eat farm-raised salmon, which may not be nearly as rich a source of DHA and EPA, depending on what they are fed. Americans also tend to consume processed foods rather than green leafy vegetables, nuts and other products that provide a third omega-3, alpha-linolenic acid (ALA).

The selling of DHA, then, offers a vehicle for understanding an irony of the modern food industry. The industrialization of food has reduced the presence of omega-3s in the food chain, creating a moneymaking opportunity to any company that can find a way to make up for its absence.

THE preoccupation with omega-3s dates back to a mystery of the early 1970s: Why, a pair of Danish researchers asked, was the incidence of heart disease so low among the Inuit of Greenland when they consumed a generally fatty diet? One obvious factor was the fatty fish that the Inuit regularly ate. Subsequent studies demonstrated a link between omega-3 fatty acids and a lower incidence of heart disease.

“People can function without adequate amounts of DHA but not as ideally or optimally,” said James H. Flatt, the head of research at Martek. “We also believe it can help a person avoid diseases later in life.”

Health food stores have long carried fish oil capsules, but what Martek’s scientists call “the burp factor” — the pills caused some to emit fishy after-burps — prompted researchers to look at the algae eaten by fish as an alternative DHA source. Concern over possible effects of mercury and other toxins in some fish was another motivator. (When distilled and treated, fish oil producers say, their product is free of contaminants.)

Martek was founded in 1985, after it was spun off from Martin Marietta, the military contractor that is now part of Lockheed Martin. A few years earlier, NASA had asked Martin Marietta to explore algae as a potential source of fresh food and oxygen on long space missions. The space agency dropped the idea, but the half-dozen or so scientists behind the project believed that they might be on to something, and they sought venture capital so they could continue their research.

When it was founded, the company saw ocean-born algae as a potential source for industrial-strength lubricants and diagnostic markers. But it did not take researchers long to discover what Henry Linsert Jr., then the company’s chief executive, described in a 1990 newspaper interview as “our first blockbuster product” — a form of DHA, which is naturally present in mother’s milk, that could be safely added to infant formula (along with arachidonic acid, or ARA, another nutrient found in breast milk that Martek buys from a third party). The company signed its first infant-formula licensing agreement in 1992 and went public the next year.

When Martek executives are confronted with skepticism about the potential of DHA as a food additive, they invariably talk about the how the company needed more than 10 years to build its infant-formula business.

At first, infant-formula makers, dubious about the benefits and the extra costs involved, proved to be one challenge; the Food and Drug Administration was another. The agency did not approve the use of DHA in infant formula until 2001. In the meantime, the company burned through roughly $500 million, said Peter L. Buzy, Martek’s chief financial officer, before earning enough on DHA sales to infant formula makers to turn profitable in 2003.

“It took a lot longer than people anticipated to make it in the infant formula market,” Mr. Buzy said.

Today, all the big formula makers offer a DHA-enhanced version of their products, and there is no longer any question whether parents are more willing to feed it to newborns. DHA-enhanced formula costs roughly 15 percent more than the regular product, but accounts for nearly 90 percent of the formula sold in the United States, Mr. Buzy said, and 35 percent of the formula sold overseas.

Indeed, once the F.D.A. approved DHA’s use in formula, Martek could not keep up with the demand. In April 2005, Martek announced that it would book around $60 million less in revenue than projected for the year, roughly a 20 percent drop. That caused the stock to fall 46 percent in a single day, to $32.49 from $60.08.

“We had a problem with customers hoarding our product,” thereby giving the company a skewed view of its success, Mr. Buzy said.

Shareholders filed a class-action suit shortly after the stock plunge. They contend that the company knew, or at least should have known, that it was artificially pumping up its revenue figures, given that almost all its revenues were from a few major customers. Martek officials declined comment on the suit, which is now in the discovery phase.

And whether DHA’s use will spread to many other food products remains to be seen.

Those skeptical of DHA as a wonder nutrient include Mr. Schardt of the Center for Science in the Public Interest and Ms. Nestle of N.Y.U. The two caution against reading too much into Martek’s success selling DHA to new parents. The calculus of decisions that new parents go through, they said, is so freighted with emotions that drawing wider conclusions could be a mistake.

“My kids were too old by then, but I probably would’ve paid the extra money for fortified formula — just in case,” Mr. Schardt said, even though he described the evidence of DHA’s benefits for newborns as “mixed.”

Yet inside Martek, the formula battle is seen as a template for success in the food industry. “We were in a very similar period then with infant formula as we are now,” Mr. Dubin said. “People said, ‘It’s never going to happen.’ Then they said, ‘It’s only going to comprise 5 percent of the infant formula business. No one is going to pay that extra money.’

“This won’t be easy, just like it wasn’t easy with infant formula,” he continued. “It’s not going to happen overnight — but it will be a lot faster than infant formula, I guarantee that, because consumers have already shown they’re willing to pay for these benefits.”

That’s a guarantee Martek backed up with cash. In 2005, the company completed a second manufacturing plant, in South Carolina, at a cost of $200 million, in anticipation of a rise in DHA orders. But last October, the company temporarily suspended DHA production in its original plant, in Kentucky, laying off 100 employees. Martek sells around $280 million a year of its product but can produce roughly three times that amount.

Mr. Dubin acknowledged some regret over Martek’s decision to aggressively expand its production capabilities. But that, it seems, was another lesson from the infant-formula struggle. “I guess we got burnt so bad not having not enough capacity a few years back that I’d rather have a little too much capacity right now and take the bet that the market will come,” he said.


TIMOTHY S. RAMEY wants to believe in Martek. A food and beverage analyst at D. A. Davidson & Company, an investment firm based in Portland, Ore., Mr. Ramey keeps a ready supply of omega-3 gel caps on his desk. “I’m a true believer,” he declared during a phone interview — but where once he encouraged clients to buy shares in Martek, no longer. In September 2005, he dropped his “buy” on Martek and now carries an “underperform,” or sell, recommendation on the stock.

“What they’re doing wrong is they structured their business for extreme levels of growth that just haven’t happened,” he said. “This is a company that has gotten into trouble time and again because it has believed its own hype.”

When reporting quarterly earnings last month, Martek said it had nine months of inventory on hand. Mr. Ramey described such large inventory levels as “risky,” but Mr. Buzy dismissed them as a temporary glitch. “It’s difficult,” Mr. Buzy said, “ to balance market demand, inventory and production all at the same time in a growing market.”

But to Mr. Ramey, a company with that much inventory is a company that has not gotten much traction in a market — foods and beverages — that it has been trying to capture since at least 2002. “What you often see happen with companies feeling financial stresses is they overproduce,” Mr. Ramey said.

Early in 2005, Martek announced a deal with Kellogg, saying it anticipated that the cereal company would release its first DHA product in 2006. Kellogg, though, has yet to release such a product, and a spokeswoman for the company, Jill Saletta, would confirm only that it was experimenting with DHA. Last June, Martek announced a similar deal with the food giant General Mills, and on Thursday released the news that the company would include DHA in Yoplait Kids, a yogurt it makes for children.

Other products enhanced with Martek’s DHA include Oh Mama! nutrition bars, for pregnant and nursing women, and soy milk produced by Odwalla, which is owned by Coca-Cola.

“The food and drink industry does not adapt quickly,” said Martek’s president, David M. Abramson. The industry average for testing a product before releasing it on the market, he said, is 2.1 years. Mr. Abramson said he expects more product releases over the coming year by food companies large and small.

Mr. Dubin said that food “will not be a big number on our books in 2007, but we’ll know by the end of the year how fast this will grow.”

But EPA, one of the other omega-3s, may give a competitive edge to fish oil companies like Ocean Nutrition Canada, based in Dartmouth, Nova Scotia. Vegetarians could wince at the idea that a fatty acid derived from anchovies and sardines might be added to their soy milk or yogurt, but fish oil costs half the price of Martek’s DHA, if not less. Both are rendered tasteless before they are put into food, though either can take on a smell if exposed too long to air.

Martek points to studies demonstrating that DHA is a far more crucial fatty acid than EPA in heart and brain development. Meanwhile, Robert Orr, chief executive of Ocean Nutrition Canada, cited studies that say EPA is potentially an effective anti-inflammatory and crucial in fighting depression and other mood disorders.

OCEAN NUTRITION’S fish oil is in several lines of yogurt made by Group Danone, the makers of the Dannon and Stonyfield Farm brands. And this month, Tropicana will start selling a version of its orange juice that includes Mr. Orr’s product. “There’ll be times where Martek’s oil works well,” Mr. Orr said, “but other than the fact it’s vegetarian, it has no technical superiority.”

Mr. Dubin of Martek allows that a food maker will sometimes choose fish oil over his product. But he is confident that Martek will have its share of big victories. “Let’s revisit this at the end of 2007 and see,” he said.

Source:
http://www.nytimes.com/2007/01/14/business/yourmoney/14omega.html?_r=1&th&emc=th&oref=slogin

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