NutraCea, which manufactures ingredients made from rice bran, is set to take an 80 percent stake in the new company, named Rice Science.
Rice Science will develop extracts for use in foods and beverages designed to address specific health conditions.
The firm will target three specific areas of health: diabetes, arthritis and immunity.
"We know that stabilized rice bran contains a rich bounty of natural compounds at therapeutic levels.
We believe by isolating these specific elements, we can create quantifiable isolates that have the potential to be measurably effective in dealing with some of the most serious health threats that we face today," said Brad Edson, chief executive officer of NutraCea.
The new agreement will also see NutraCea and HerbalScience create a second joint venture, for the development of drugs from stabilized rice bran.
Stabilized rice bran is a rich source of vitamins, minerals, and antioxidants that is normally discarded during rice processing.
NutraCea underscores the nutraceutical properties of rice bran surround a complex of vitamin E referred to as 'tocotrienols' as well as gamaoryzanol.
According to NutraCea, the compounds are only found in rice and are powerful antioxidants.
The company also markets its stabilized rice bran is also marketed for its purportedly high levels of B-complex vitamins, betacarotene, and soluble and insoluble fiber.
NutraCea has so far been promoting the ingredient as a means of eradicating malnutrition around the world.
However, the company has also been taking steps towards the mainstream food industry of late, due to its potential to be used in functional, or 'health-promoting', products.
One step towards this end was an agreement signed with ADM last year.
That saw ADM Rice, a division of the agribusiness giant, using NutraCea's proprietary rice stabilization technology at its Arbuckle, California facility.
The company also recently announced a distribution agreement with Mexican group FX Morales, whose customers include multinationals Grupo Gamesa (Frito Lay, Pepsico, Quaker, Gatorade) Grupo Bimbo, Grupo Maseca, Kellogg, Nestle, Kraft, Unilever and Bristol Myers Squibb.
NutraCea also brought its technology to Italian Giulio Gross through a distribution agreement.
The formation of a new company exclusively for the production of functional ingredients from rice bran is another major step in efforts to bring the product to the mainstream market.
HerbalScience CEO Robert Gow is confident in the potential of rice bran as a functional ingredient, both for use in foods and drugs.
"Together with NutraCea, we feel we can develop proprietary and efficacious extracts from their stabilized rice bran that have clearly defined health and wellness benefits for use in foods and consumer products, and identify patentable chemistries that have the potential to be turned into drugs for the pharmaceutical industry," he said today.