Innovative branded ingredients for functional foods and dietary supplements

InterHealth is an innovator of branded, patented ingredients that are clinically studied and sold worldwide to manufacturers of dietary supplements and functional foods & beverages.  InterHealth’s products provide condition specific benefits for joint health, sports nutrition, weight management, cardiovascular health, blood sugar control and mood health. The importance of InterHealth’s branded ingredients to its customers’ products is evident from the frequency with which those products include InterHealth’s brands on their packaging and in their marketing materials.

The Value Creation Opportunity

InterHealth’s business model aligned well with Kainos’ investment themes around specialty ingredients and health & wellness. Due to our familiarity with the sector and ability to efficiently conduct due diligence, we pre-empted the sale process and partnered with Paul Dijkstra and the InterHealth team in 2013.

We shared a vision with Paul to create a strategic ingredient player of scale that provided branded ingredients critical to the identity and functionality of the end products in which they are used. Kainos believed that the efficacy of InterHealth’s proprietary branded ingredient portfolio was supported by extensive clinical data and created a real competitive advantage and barriers to entry. InterHealth was at an inflection point in its business where revenue and profit growth were poised to accelerate with additional key investments in R&D, sales and supply chain.

Change Capital At Work

Following a review of their R&D and innovation pipeline, we more than doubled the R&D budget during our first year of the partnership, investing in clinical research to enhance the scientific support for their portfolio of products.  In addition, we built a robust pipeline of new products, including the development of gummy applications for our core joint health ingredient UC-II, powder applications for ZMA, a sports nutrition ingredient that was primarily marketed in tablet form, and a promising anti-inflammatory product.

We worked alongside Paul to build out his management team, particularly in the areas of supply chain, operations and sales, and to realign the sales and marketing functions to better address both domestic and international markets for key products. We also leveraged our network within the nutritional supplement industry to accelerate sales growth and develop new customer relationships including Pfizer, NBTY, and Costco.

Within months of our partnership, we acquired the third party manufacturing assets for UC-II to better control the entire supply chain.  The Kainos team also proactively sought out and evaluated opportunities to expand the product portfolio through add-on acquisitions and partnerships.  We led the M&A efforts for InterHealth and acquired 7-Keto, a weight loss ingredient, in 2014, and Next Pharmaceuticals, a portfolio of branded ingredients serving the stress management and heart health end markets, in 2015.

Working with Paul Dijkstra, we sold InterHealth to Lonza Group, a diversified pharmaceutical, biotech and specialty ingredients company in 2016, less than three years into our partnership, after tripling the profitability of the business.