Astaxanthin softens sales blow for Cyanotech
Cyanotech, which has reported that a 27 percent drop in sales for
3Q 2006 compared to the prior year period are down to reduced
orders for spirulina and for NatuRose aquaculture products.
The Hawaii biotech reported net sales of $2.3 million for the quarter ended December 31 2005. The nine month picture shows about $1 million fewer sales in the fiscal year to date ($7.8 million compared to $8.8 million at the same point in 2004).
Operating loss improved slightly on the previous quarter, from -$298,000 to -$236,000 this year. But it remains a significant drop from 3Q 2005, when the company reported operating results that were squarely in the black, of $318,000.
"Our principal marketing and sales focus on BioAstin Natural Astaxanthin as an ingredient in health formulations continues to produce results with the number of wholesale customers and the level of BioAstin sales going up again in the third quarter," said president and CEO Gerald Cysewski.
"The bulk of our promotional budget continues to be dedicated to this effort."
Earlier this month the company announced that it has retained the services of Minnesota-based Media Relations for a consumer advertising campaign.
Astaxanthin is produced by the Haematacoccus pluvialis algae when water supplies in its habitat dry up to protect itself against the effects of UV radiation. Research has shown it to have a similar structure to lutein and zeaxanthin, but there are indications that it has an even stronger antioxidant activity.
It has been studied for a number of health indications, including eye health, skin health and immune disorders.
The popular of astaxanthin as an ingredient in dietary supplement formulations in the US. Around 50 percent of Cyanotech's overall sales are to clients in the US. Cysewski told NutraIngredients-USA.com in January that he expects the market to grow steadily over the next five to 10 years, as more people around the world become aware of its benefits and uses.
In Japan he said sales could double this year over 2005. Europe, however, is three or four years behind the US and Japan; although it is growing, there is not so much awareness at both customer and retailer level.
In November Cysewski travelled to Asia, where distribution agreements were inked with a Chinese-American joint venture. Although the regulator wheels are still in motion, these are expected to yield orders for both BioAstin and NatuRose in 2006.
"China is the most populous nation in the world, and the economy is growing. With acceptance of supplements increasing, there is great potential."
Spirulina pacifica is also used in human nutrition, as has been studied for its effect on brain health. The company claims to hold a leading share of the market, which is starting to enter maturity. It remains optimistic that sales will pick up again once, however, once customers have worked their way through existing inventory.
"The schedule for purchasing spirulina among our customers has always been viable," said Cysewski.
Over the past 18 months Cyanotech has taken measures to protect itself against such variations in demand by carrying out improvement works on its ponds, which allow it to switch between spirulina and astaxanthin production with a lead time of about 10 days.
It has a total of 69 ponds, most of which were in production at the end of 3Q. Twelve ponds are currently growing astaxanthin.
The reasoning behind increasing its potential astaxanthin capacity by 70 percent was primarily to meet demand from the aquaculture market in Japan, however because this market has suffered a setback due to the effects of adverse weather, it is not yet utilizing the added capacity.
Cyanotech is aiming to move as much astaxanthin to the human nutrition market as possible, but aquaculture remains a very important part of the business. The NatuRose aquaculture product allows it to maintain high production capacity, which means it can keep costs down across the board.
Although the distribution agreement in China was a positive step forward for the company with regard to NatuRose, Cysewski said that this aquaculture product still remains "challenging". In Japan, reduced sales and pricing of sea bream are causing growers to use less astaxanthin in feed.
Since there are no signs of this trend abating, the company is investigating diversification into alternative channels, such as trials using astaxanthin for Spanish mackerel, the ornamental or tropical fish market (astaxanthin contributes to vibrant colors), and riding the all-natural ticket in a bid to steal some of the market from synthetic astaxanthin producers.
There is also a possibility that astaxanthin may find a home in food for other animals, such as dogs.
