1. Neptune Technologies & Bioressources, Inc.
® (NEPT)
INITIATING COVERAGE Elemer Piros, Ph.D.
212-430-1754
epiros@rodm.com
LIFE SCIENCES Suy Anne Martins, M.D., Ph.D.
212-430-1778
April 25, 2012 smartins@rodm.com
Market Outperform / Speculative Risk
Healthy Living: “Krilled”, not Fried
Initiation of Coverage
MARKET DATA 4/25/2012
We are initiating coverage of Neptune Technologies & Bioressources
Price $3.08
with a Market Outperform rating and 12-month price target of $7/share.
Exchange NASDAQ
Target Price $7.00
We believe Neptune’s differentiated product NKO ® has the potential to
52 Wk Hi - Low $4.66 - $2.02 capture a significant share in the vastly expanding omega-3 fatty acid
Market Cap(MM) $153.0 nutraceutical and pharmaceutical markets.
EV(MM) $142.9
Shares Out (MM) 49.7
Public Mkt Float (MM) 42.6
Better than Fish Oil
Avg. Daily Vol 63,816 Neptune’s pipeline is based on phospholipid omega-3s extracted from
Short Interest 308,022 Antarctic krill, a tiny crustacean. The company plans to take advantage
of the higher absorption and potential superior efficacy of krill omega-3
BALANCE SHEET METRICS
compared to fish oils.
Cash (MM) $17.7
LTD (MM) $4.0
Total Debt/Capital 0.1%
Cash/Share $0.04 Multiple Markets
Book Value(MM) $29.5
Book Value/Share $0.60 Neptune is addressing several markets: dietary supplements, functional
foods, and drug development. The entire omega-3 consumer product
EARNINGS DATA ($) market has already reached $13B worldwide. Globally, sales of omega-3
FY - Dec 2010A 2011A 2012E dietary supplements grew from $1.8B in 2007 to $2.8B in 2009. We
Q1 (Mar) (0.04) 0.01 (0.03)A believe that Neptune could capture a sizeable portion of the market due
Q2 (Jun) (0.06) 0.01 (0.04)A to its differentiated krill based omega-3 platform enabling diverse
Q3 (Sep) 0.05 0.04 (0.01)A opportunities.
Q4 (Dec) (0.00) (0.04) (0.03)
Full Year EPS (0.04) 0.01 (0.10)
Revenue (MM) 12.7 16.7 19.8 Blockbuster through a Sub
Neptune’s majority-owned subsidiary, Acasti Pharma (APO, Not Rated),
is pursuing a potentially blockbuster indication in cardiovascular disease.
INDICES
CaPre®, a concentrated form of NKO ®, is in Phase 2 clinical trials
DJIA 13,090.0 targeting the large hypertriglyceridemia market. Lovaza™, an omega-3
SP-500 1,389.6
fatty acid approved for lowering triglycerides, recorded 2011 sales of
NASDAQ 2,707.9
NBI 1,278.9
~$1.1B in the U.S. alone. The company that initially introduced Lovaza™
was acquired for $1.7B in 2007. Amarin (AMRN, Not Rated), with
1 Year Price History positive pivotal data for the same indication, is valued at ~$1.4B. In our
5 view, CaPre ® could become an important value driver for Neptune.
4
3
2
Upside to Current Valuation
1
Q1 Q2 Q3 Q1 Q2
2012
0.8
We value Neptune shares, based on a sum of the parts analysis: (1)
0.6
0.4
probability-adjusted NPV model for CaPre®, which yields $120MM (58%
0.2
0
ownership), and (2) a DCF valuation on the nutraceutical business,
Created by BlueMatrix which contributes $230MM plus $26MM projected cash to our model.
The combined value of these two programs is estimated at $370MM, or
$7/share, factoring in fully diluted shares. Upon completion and
successful outcome of CaPre® Phase 2 development, the value
attributed to this program could rise from $120MM to $240MM, boosting
Neptune’s target value from $7 to $9/share, in our view.
For definitions and the distribution of analyst ratings, and other disclosures, please refer to pages 45 - 46 of this report.
2. Neptune Technologies & Bioressources, Inc. April 25, 2012
INVESTMENT THESIS ................................................................................................................................. 3
RISK ANALYSIS ........................................................................................................................................... 3
COMPANY OVERVIEW ................................................................................................................................ 5
INFLAMMATION AND MARINE N-3 FATTY ACIDS (OMEGA-3) ................................................................ 6
OMEGA-3 FATTY ACIDS IN CARDIOVASCULAR INDICATIONS............................................................ 12
HYPERTRIGLYCERIDEMIA ....................................................................................................................... 13
®
WHY NKO , WHY KRILL? .......................................................................................................................... 15
POTENTIAL MULTIPLE BENEFITS ........................................................................................................... 18
GLOBAL OMEGA-3 MARKET POISED TO GROW ................................................................................... 24
EXPANDING THE NEPTUNE PORTFOLIO............................................................................................... 28
TAPPING CHINA, THE FASTEST GROWING OMEGA-3 MARKET ......................................................... 29
KRILL OIL: A PRESCRIPTION DRUG? ..................................................................................................... 30
NUTRACEUTICAL COMPETITION - AKER BIOMARINE ......................................................................... 35
INTELLECTUAL PROPERTY ..................................................................................................................... 35
INCREASING MANUFACTURING CAPACITY AND DISTRIBUTION ....................................................... 36
VALUATION ................................................................................................................................................ 37
EXECUTIVE BIOGRAPHY ......................................................................................................................... 38
FINANCIALS ............................................................................................................................................... 42
RODMAN & RENSHAW EQUITY RESEARCH 2
3. Neptune Technologies & Bioressources, Inc. April 25, 2012
INVESTMENT THESIS
Neptune Technologies & Bioressources began operations in 1998, by developing a process for the
extraction of oils from marine biomasses. The company commercializes its flagship nutraceutical product
®
Neptune Krill Oil (NKO ) through a distributor network in more than 30 countries. In recent years, the
Company also established higher value product lines for:
The pharmaceutical market, represented by two subsidiaries:
®
o Acasti, which is developing the lipid-lowering drug CaPre
o NeuroBioPharm, which is pursuing neurological applications
Medical food ingredients, represented by partnerships with Yoplait (Private, Not Rated) and
Nestle (NESN, Not Rated)
Neptune’s pipeline is based on omega-3 fatty acid phospholipids extracted from Antarctic krill, a tiny
crustacean, considered the most abundant biomass on earth. The company is generating cash flow from
®
the sales of its nutraceutical omega-3 product, NKO . Neptune is taking advantage of the higher
bioavailability and potential superior efficacy of krill oil in providing omega-3 fatty acids for human
consumption. Krill oil is the only source of omega-3 fatty acids that contains phospholipids; which
appears to make krill omega-3s more bioavailable and efficacious than fish oil or flax oil omega-3s.
®
Additionally, NKO is the source of omega-3s that naturally carries the highest amount of astaxanthin, a
powerful antioxidant attached to omega-3s. It is important to note, that fish oil does not contain any
®
astaxanthin. Given the increasing demand for NKO , Neptune is expanding its capacity to address a
1
market that is expected to grow on average 12% annually .
®
Preclinical and initial clinical trials have demonstrated that NKO decreases LDL and triglycerides, while
increasing HDL (the perfect lipid trifecta - critical in the management of chronic cardiovascular disorders).
®
Acasti - Neptune’s subsidiary - is in Phase 2 trials with the clinical candidate CaPre targeting the large
hypertriglyceridemia market.
A Japanese firm, Mochida (Private, Not Rated), markets an omega-3 drug – Epadel - in Japan for
managing triglycerides. Annual sales of Epadel in Japan were ~$433MM in F2010 and they are
2
forecasted to be similar in F2011 . Another omega-3 product approved by the FDA for triglyceride
®
lowering is marketed in the U.S. as Lovaza™, and as Omacor ex-U.S. Lovaza™ was initially marketed
by Reliant Pharmaceuticals, which was acquired by GlaxoSmithKline (GSK, Not Rated) for $1.7B.
®
Lovaza™/Omacor is manufactured by Pronova BioPharma (PRON.OL, Not Rated) and sold by several
licensing partners worldwide. Lovaza™ achieved blockbuster status in 2009. The drug reached $1.2B in
sales in 2011 in the U.S. alone. Finally, Amarin is also developing AMR101, an omega-3 fatty acid as a
prescription drug to treat severe hypertriglyceridemia. The company is currently valued at ~$1.4B, even
though the product is not on the market, yet. Therefore, we believe the upside potential for Neptune
could be significant.
RISK ANALYSIS
We ascribe a Speculative Risk rating to Neptune shares. In addition to development, manufacturing,
marketing, and financial risks associated with emerging biotechnology companies, specific additional risk
factors to be considered are as follows:
Highly Competitive Nutraceutical Business
There is already a large number of different formulations of omega-3 fatty acids available on the market.
Most of these products are not approved as drugs; they are mainly marketed as nutraceuticals. The
omega-3 market has become highly competitive. Enhanced competition and pressure on margins drive
cost competitiveness among established brands. Building market awareness of the differentiated profile
of krill oil may entail a significant marketing effort, in our view. In addition, the company faces meaningful
1
Frost & Sullivan, 2010.
2
EvaluatePharma Worldwide Product Sales.
RODMAN & RENSHAW EQUITY RESEARCH 3
4. Neptune Technologies & Bioressources, Inc. April 25, 2012
competition from other krill oil manufacturers, such as Aker Biomarine (AKBM, Not Rated) and Enzymotec
(Private, Not Rated).
Patent Challenge
Neptune has issued U.S. patents of omega-3 phospholipids and krill extracts on both composition of
matter and method of use in cardiovascular disease. However, Aker BioMarine filed for patent
reexamination request in the U.S. against two of Neptune’s patents – U.S. Pat. No. 8,030,348 (also
known as 348 patent) and U.S. Pat. No. 8,057,825 (also known as 825 patent). The 348 patent covers
novel omega-3 phospholipid compositions suitable for human consumption, while the 825 patent is
directed to methods of using krill extracts to reduce cholesterol, platelet adhesion and plaque formation.
Should both of these patents be overturned, damage to the manufacturing business would be minimal.
However, maintenance of the claims on these patents could represent a significant upside to Neptune:
the company could become the only source of krill oil and derived products in the U.S.
Regulatory risk
Drug development is an inherently risky business. Acasti’s drug development projects could fail to
generate positive results from current or future clinical trials. Even if trials are successful, the FDA could
reject the firm’s regulatory filings for unforeseen reasons, or require additional studies prior to granting
approval. However, we believe that negative outcomes from cardiovascular trials would have a minor
impact on Neptune’s nutraceutical business compared to the sizable upside that a potential FDA approval
could bring to the company.
Capacity Expansion Risk
In March 2012, Neptune announced completion of expansion plans in its Sherbrook plant (Canada).
Expansion could cost $20MM and could generate at least 40 new jobs. The company intends to triple its
current production capacity from 150,000kg to 450,000kg per year by the end of F2014. Neptune is
expecting a higher demand for its product. However, unexpected decrease in anticipated demand could
have a negative impact on Neptune’s business model.
RODMAN & RENSHAW EQUITY RESEARCH 4
5. Neptune Technologies & Bioressources, Inc. April 25, 2012
COMPANY OVERVIEW
Neptune Technologies & Bioressources (NEPT, Market Outperform) is a biotechnology company
engaged in the manufacturing and formulation of marine omega-3 phospholipids. The company develops
and commercializes its products for multiple nutraceutical and medical markets. Neptune’s products are
®
mainly proprietary krill oils marketed under the trademarks NKO and EKO™. The company also exploits
various protein concentrate formulations extracted from the different marine biomass.
The company has a 58% ownership in the pharmaceutical spin-out Acasti Pharma (APO, Not Rated),
® ®
which is developing CaPre as a prescription drug for cardiovascular diseases. Results from CaPre
®
Phase 2 open-label clinical trial are expected in mid-2012. In parallel, Acasti is also conducting a CaPre
Phase 2 double-blind study, with data expected in early 2013.
Additionally, Neptune supervises its CNS subsidiary NeuroBiopharm that is expected to develop krill oil
prescription drugs in neurological disorders. Neptune was founded in 1998 and is headquartered in
Laval, Canada.
Nutraceutical Market
In its manufacturing plant (Quebec), Neptune develops and produces a range of marine health
ingredients grouped under the OPA™ trademark. The products are composed of different concentrations
®
and ratios of omega-3 containing phospholipids and antioxidants. The Neptune krill oil products NKO
and EKO™ are marketed either by distributors or by different private labels in the dietary supplement and
functional ingredient markets.
®
Neptune Krill Oil (NKO )
®
Neptune Krill Oil (NKO ) is naturally sourced from Antarctic Krill (Exhibit 1). It contains a patented blend
of omega-3 fatty acids bound to phospholipids as well as astaxanthin, an antioxidant. The main
®
components of NKO are phospholipid esters of the widely-known nutritional fatty acids DHA
(docosahexaenoic acid) and EPA (eicosapentaenoic acid). DHA and EPA have been linked to a broad
spectrum of health benefits in:
3
Chronic inflammation and arthritis
4
Hyperlipidemia (high cholesterol blood levels)
5
Premenstrual syndrome
6
Cognitive disorders, and many other inflammatory conditions
Exhibit 1: Antarctic Krill
Source: Neptune website.
The antioxidant astaxanthin has been investigated in a large number of studies related to the
®
cardiovascular and cerebrovascular systems. The NKO formulation appears to have a positive impact
on blood lipid profile, at a lower dose than alternative omega-3 formulations. Superior bioavailability has
been suggested for phospholipid-bound omega-3 fatty acids in krill oil.
3
Deutsch L. American College of Nutrition (2007) 26(1):39-48.
4
Bunea R. et al., Alternative Medical Review (2004) 9(4):420-428.
5
Sampalis F., et al., Alternative Medical Review (2003) 8(2):171-179.
6
Calder P.C., et al., European Journal of Pharmacology (2011) 668: S50–S58.
RODMAN & RENSHAW EQUITY RESEARCH 5
6. Neptune Technologies & Bioressources, Inc. April 25, 2012
Neptune continues to expand its customer base worldwide and is expecting revenue growth to be driven
by repeat demand from existing customers and incoming demand from new customers from North
America, Europe, Asia, South America, and Middle East.
Prescription Drug Market
Neptune is also developing products for the prescription drug markets through its two subsidiaries, Acasti
and NeuroBioPharm. Acasti is developing a pipeline focused on treatments for chronic cardiovascular
disorders within the OTC (over-the-counter), medical food and prescription drug markets. Acasti’s drug
® ®
candidate, CaPre , is a concentrated form of NKO and recently received approval to enter Phase 2
clinical trials from Health Canada. NeuroBioPharm is pursuing pharmaceutical neurological applications.
INFLAMMATION AND MARINE N-3 FATTY ACIDS (OMEGA-3)
Inflammation is a normal defense mechanism that protects the host from infection and other injuries; the
process triggers pathogen death, as well as tissue repair and wound healing, and helps to restore
homeostasis at infected or injured sites. However, pathological inflammation may occur when there is a
loss of tolerance and/or of regulatory processes. Where this becomes excessive, irreparable damage to
7
host tissues and disease can occur .
Inflammatory disorders are characterized by markedly increased levels of inflammatory markers and high
concentration of inflammatory cells at the site of injury and in the systemic circulation (rheumatoid
arthritis, inflammatory bowel diseases, asthma). Inflammatory diseases have been long recognized, yet it
is only more recently that chronic low-grade inflammation has received attention, particularly in relation to
obesity, metabolic syndrome and cardiovascular disease. Chronic low-grade inflammation is
characterized by raised concentrations of inflammatory markers in the systemic circulation.
Fatty acids (FAs) are naturally occurring constituents that have extensive metabolic, structural and
functional roles within the body. They are important sources of energy, major components of all cell
membranes, and precursors to signaling molecules. All fatty acids have a generic structure being based
on a hydrocarbon chain with a reactive carboxyl group at one end and a methyl group at the other.
Fatty acid chain lengths vary from 2 to 30 or more carbon atoms, and the chain may contain double
8 9
bonds . Fatty acids containing double bonds in the acyl chain are referred to as unsaturated fatty acids,
and a fatty acid containing two or more double bonds is called a polyunsaturated fatty acid (PUFA). The
systematic name for a fatty acid is determined simply by the number of carbons and the number of double
bonds in the acyl chain (Exhibit 2). There are two principal families of PUFAs: the n-6 (omega-6) and the
n-3 (omega-3) families. In our report, the keen interest lies on PUFAs, especially the longer-chain ones,
the omega-3 family.
7
Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
8
A double bond in chemistry is a chemical bond between two chemical elements involving four bonding electrons instead of the
usual two. Double bonds are stronger than single bonds.
9
An organic radical derived from an organic acid via removal of the hydroxyl group from the carboxyl group. It is a generic term for
fatty acid groups.
RODMAN & RENSHAW EQUITY RESEARCH 6
7. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 2: Fatty Acid Naming
Systematic name Trivial name Shorthand notation
Octanoic Caprylic 8:00
Decanoic Capric 10:00
Dodecanoic Lauric 12:00
Tetradecanoic Myrsitic 14:00
Hexadecanoic Palmitic 16:00
Octadecanoic Stearic 18:00
cis 9-Hexadecenoic Palmitoleic 16:1n-7
cis 9-Octadecenoic Oleic 18:1n-9
cis 9, cis 12-Octadecadienoic Linoleic 18:2n-6
All cis 9, 12, 15-Octadecatrienoic α-Linolenic 18:3n-3
All cis 6, 9, 12-Octadecatrienoic γ-Linolenic 18:3n-6
All cis 8, 11, 14-Eicosatrienoic Dihomo-γ-linolenic 20:3n-6
All cis 5, 8, 11, 14-Eicosatetraenoic Arachidonic 20:4n-6
All cis 5, 8, 11, 14, 17-Eicosapentaenoic Eicosapentaenoic 20:5n-3
All cis 7, 10, 13, 16, 19-Docosapentaenoic Docosapentaenoic 22:5n-3
All cis 4, 7, 10, 13, 16, 19-Docosahexaenoic Docosahexaenoic 22:6n-3
Source: Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
Polyunsaturated Fatty Acids (PUFAs): Omega-6 and Omega-3
Both omega-6 and omega-3 fall under the category of polyunsaturated fatty acids. The simplest
members of each family - linoleic acid (LA, omega-6 family) and α-linolenic acid (ALA, omega-3 family) -
cannot be synthesized by mammals. They are considered "essential" since the body is not able to make
significant enough amounts.
LA is found in significant quantities in many vegetable oils, including corn, sunflower and soybean oils,
and in products made from such oils, such as margarines. ALA is found in green plant tissues, in some
common vegetable oils, including soybean and rapeseed oils, in some nuts, and in flaxseeds (also known
as linseeds) and flaxseed oil. Between them, LA and ALA contribute over 95%, and perhaps as much as
98% of dietary PUFA intake in most Western diets.
th
The intake of LA in Western countries increased considerably in the second half of the 20 Century,
10
following the introduction and marketing of cooking oils and margarines . Typical intakes of both
essential fatty acids are in excess of the required amounts. The increase of consumption of LA has
resulted in a marked increase in the ratio of omega-6 to omega-3 PUFAs in the diet. This ratio is typically
11
between 5 and 20 in most Western populations .
Although LA and ALA cannot be synthesized by humans, they can be metabolized to other fatty acids.
LA can be converted to arachidonic acid. By an analogous set of reactions catalyzed by the same
enzymes, ALA can be converted to eicosapentaenoic acid (EPA). Both arachidonic acid and EPA can be
further metabolized, EPA giving rise to docosapentaenoic acid (DPA) and docosahexaenoic acid (DHA)
(Exhibit 3).
10
Blasbalg, T.L., et al., American Journal of Clinical Nutrition (2011) 93:950-962.
11
Burdge G.C., et al., Nutrition Research Reviews (2006) 19:26-52.
RODMAN & RENSHAW EQUITY RESEARCH 7
8. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 3: The Biosynthesis of Polyunsaturated Fatty Acids
Methyl Carbon
Group Double Carboxyl
bond Group
Source: Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
Dietary intakes of the longer-chain omega-3 PUFAs, such as EPA and DHA, are typically much lower
than the intakes of LA and ALA. EPA and DHA are found in fish, especially so-called “oily” fish (tuna,
12
salmon, mackerel, herring, sardine) and krill, a small red-colored crustacean (similar to shrimp) that
13
flourish in the extremely cold waters of the Antarctic Ocean .
Omega-3 PUFAs Modify Fatty Acid Composition of Inflammatory Cells
PUFAs are important constituents of the phospholipids of all cell membranes (Exhibit 4). Laboratory
animals that have been maintained on standard chow have a high content of the omega-6 PUFA
arachidonic acid and low contents of the omega-3 PUFAs EPA and DHA in the bulk phospholipids of
14,15 16;17;18,19 20 21
tissue lymphocytes , peritoneal macrophages alveolar macrophages , Kupffer cells and
22
alveolar neutrophils .
12
Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
13
Krill oil. Monograph. Alternative Medicine Review (2010) 15(1):84-86.
14
Calder P.C., et al., Biochemical Journal (1994) 300:509-518.
15
Yaqoob P., at al., Cellular Immunolology (1995) 163:120-128.
16
Brouard C., et al., Biochimica et Biophysica Acta (1990) 1047:19-28.
17
Chapkin R.S., et al., Journal of Nutritional Biochemistry (1992) 3:599-604.
18
Lokesh B.R., et al., Journal of Nutrition (1986) 116:2547-2552.
19
Surette M.E., et al., Biochimica et Biophysica Acta (1995) 1255:185-191.
20
Fritsche K.L., et al., Lipids (1993) 28:677-682.
21
Palombo J.D., et al., Journal of Parenteral and Enteral Nutrition (1997) 21:123-132.
22
Careaga-Houck M., et al., Journal of Lipid Research (1989) 30:77-87.
RODMAN & RENSHAW EQUITY RESEARCH 8
9. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 4: Cell Membrane: Phospholipids, Fatty Acids and Antioxidants
Source: Kidd P.M. Alternative Medicine Review (2007) 12(3):207-227.
Feeding laboratory animals a diet containing fish oil, which provides EPA and DHA, results in a higher
23 24 25 26
content of these fatty acids in lymphocytes , macrophages , Kupffer cells and neutrophils . Typically
enrichment in marine omega-3 PUFAs is accompanied by a decrease in content of arachidonic acid.
Blood cells involved in inflammatory responses (neutrophils, lymphocytes, monocytes) collected from
humans consuming typical Western diets contain about 10 to 20% of fatty acids as arachidonic acid,
27
about 0.5 to 1% as EPA and about 2 to 4% as DHA in their membranes , although the content of these
28
fatty acids varies in different phospholipid classes .
The fatty acid composition of these cells can be modified by increasing intake of marine omega-3 fatty
29 30 31
acids . This occurs in a dose response fashion and over a period of days to weeks , with a new
steady-state composition reached within about four weeks. Typically the increase in content of omega-3
PUFAs occurs at the expense of omega-6 PUFAs, especially arachidonic acid. Exhibit 5 shows the time
course of changes in EPA and DHA contents of human blood mononuclear cells in subjects consuming
fish oil. Healthy subjects supplemented their diet with fish oil capsules providing 2.1g EPA plus 1.1g DHA
per day for a period of 12 weeks. Blood mononuclear cell phospholipids were isolated at 0, 4, 8 and 12
weeks and their fatty acid composition determined by gas chromatography. Data are mean from eight
32
subjects .
23
Yaqoob P., et al., Biochimica et Biophysica Acta (1995) 1255:333-340.
24
Brouard C., et al., Biochimica et Biophysica Acta (1990) 1047:19-28.
25
Palombo J.D., et al., Journal of Parenteral and Enteral Nutrition (1997) 21:123-132.
26
James M.J., et al., Journal of Nutrition (1991) 121:631-637.
27
Caughey G.E., et al., American Journal of Clinical Nutrition (1996) 63:116-122.
28
Sperling R.I., et al., Journal of Clinical Investigation (1993) 91:651-960.
29
Lee J.Y., et al., Journal of Biological Chemistry (2001) 276:16683-16689.
30
Rees D., et al., American Journal of Clinical Nutrition (2006) 83:331-342.
31
Faber J., et al., Journal of Nutrition (2011) 141, 964-970.
32
Yaqoob P., et al., European Journal of Clinical Investigation (2000) 30, 260-274.
RODMAN & RENSHAW EQUITY RESEARCH 9
10. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 5: Changes in EPA and DHA in Mononuclear Cells from Humans Taking Fish Oil
Source: Yaqoob P., et al., European Journal of Clinical Investigation (2000) 30, 260-274.
Omega-3 Mechanisms of Action
A high ratio of omega-6 to omega-3 can alter cell membrane properties and increase production of
inflammatory mediators because arachidonic acid, an omega-6 fatty acid found in cell membranes, is the
33
precursor of inflammatory eicosanoids, such as prostaglandins and thromboxanes . In contrast, omega-
3 fatty acids are anti-inflammatory. Therefore, a high dietary ratio of omega-6 to omega-3 fatty acid could
promote inflammation. Increased omega-3 fatty acid concentration in the diet may also act by altering
cell membrane fluidity and phospholipid composition, which may alter the structure and function of the
proteins embedded in it.
All in all, omega-3 fatty acids appear to act through the enrichment of membrane phospholipids with EPA
and DHA. Once these long chain omega-3 PUFAs are resident in cell membranes, they have at least
four separate effects:
First, because of their highly unsaturated nature, they may alter membrane properties. This can
have the secondary effect of changing the microenvironment of transmembrane proteins (e.g.,
receptors) altering the manner in which they interact with their ligands.
Altering membrane fatty acids composition can also affect the ability of proteins to actually
associate with the membrane and consequently interact with other multi-protein complexes
involved with cell signaling systems
In addition, a variety of cell stressors (e.g., inflammatory mediators) interact with transmembrane
receptors and subsequently initiate intracellular G-protein linked responses, one of which is the
activation of phospholipase A2 (PLA2). This enzyme hydrolyzes long-chain omega-6 and
omega-3 fatty acids esterified to inner leaflet phospholipids, liberating them and making them
available for conversion to a wide variety of eicosanoids via cyclo-oxygenase, lipoxygenase, and
cytochrome P-450 monooxygenases. These molecules powerfully influence cellular metabolism.
PLA2-liberated omega-3 fatty acids may directly modify ion channel activity themselves, resulting
in altered resting membrane potentials.
Finally, intracellular omega-3 fatty acids are also able to serve as ligands for a variety of nuclear
receptors [e.g., peroxisome proliferation activated receptors (PPARs), sterol receptor element
binding protein (SREBP)-1c, retinoid X receptor, and the farnesol X receptor] which impact
inflammatory responses and lipid metabolism (Exhibit 6).
33
Simopoulos A.P. Journal of the American College of Nutrition (2002) 21:495-505.
RODMAN & RENSHAW EQUITY RESEARCH 10
11. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 6: Overview of Mechanisms by Which Omega-3 PUFAs Can Influence Inflammatory Cell
Function
Source: Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
Anti-Inflammatory Effects of Omega-3 Fatty Acids Suggest Therapeutic Value
Inflammation is an element of numerous human conditions and diseases (Exhibit 7). Although
inflammation may affect different body compartments, one common characteristic of these conditions and
34
diseases is disproportionate production of inflammatory mediators including eicosanoids and cytokines .
Exhibit 7: Diseases and Conditions with an Inflammatory Component
Disease/Condition
Rheumatoid arthritis
Crohn's disease
Ulcerative colitis
Lupus
Type-1 diabetes
Cystic fibrosis
Childhood asthma
Adult asthma
Allergic disease
Chronic obstructive pulmonary disease
Psoriasis
Multiple sclerosis
Atherosclerosis
Acute cardiovascular events
Obesity
Neurodegenerative diseases of ageing
Systemic inflammatory response to surgery, trauma and critical illness
Source: Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
Note: this list is not exhaustive.
The role of omega-3 PUFAs in shaping and regulating inflammation imply that exposure to these fatty
acids might be important in determining the development and severity of inflammatory diseases. The
recognition that omega-3 PUFAs have anti-inflammatory effects has led to the notion that dietary
supplement of patients with inflammatory diseases may be of clinical benefit. Each of the diseases or
conditions listed in Exhibit 7 is a possible therapeutic target for marine omega-3 PUFAs.
Supplementation trials have been conducted in most of these diseases. Rheumatoid arthritis’ trials
34
Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
RODMAN & RENSHAW EQUITY RESEARCH 11
12. Neptune Technologies & Bioressources, Inc. April 25, 2012
35
appear to be the most successful with most studies reporting several clinical benefits . These benefits
36
are supported by meta-analyses of the available data .
Studies in patients with inflammatory bowel diseases (Crohn's disease and ulcerative colitis) provide
37,38
equivocal findings with some showing some benefits and others not . Likewise studies conducted in
patients with asthma do not provide a clear picture. Most studies conducted in adults do not show a
clinical benefit, while there are indications of benefits of marine omega-3 PUFAs in children and
39
adolescents, although there are few studies in those groups . In most other inflammatory diseases and
conditions there are too few studies to draw a clear conclusion of the possible efficacy of omega-3 PUFAs
as a treatment. Exceptions to this may be related to cardiovascular disease morbidity and mortality, and
40
attention deficit hyperactivity disorder (ADHD) .
41
There is evidence that omega-3 PUFAs slow the progress of atherosclerosis , which has an
42,43
inflammatory component . Moreover, omega-3 PUFAs decrease mortality due to cardiovascular
44 45 46
disease , ; this may be, in part, due to stabilization of atherosclerotic plaques against rupture , which
47
again has an inflammatory component . Thus, the anti-inflammatory effects of marine omega-3 PUFAs
may contribute to their protective actions towards atherosclerosis, plaque rupture and cardiovascular
mortality. We are going to discuss omega-3 PUFAs and cardiovascular diseases (CVDs) in more detail in
the next section.
OMEGA-3 FATTY ACIDS IN CARDIOVASCULAR INDICATIONS
The omega-3 fatty acids found in fish, fish oils and krill oils – principally EPA and DHA – have been
48,49
reported to have a variety of beneficial effects in cardiovascular diseases . Ecological and prospective
cohort studies as well as randomized, controlled trials have supported the view that the effects of these
fatty acids are clinically relevant. They operate via several mechanisms, all beginning with the
50
incorporation of EPA and DHA into cell membranes , as we discussed before.
Because blood concentrations of omega-3 PUFAs are a strong reflection of dietary intake, it is proposed
that an omega-3 biomarker - the omega-3 index (erythrocyte EPA + DHA) - be considered as a potential
51
risk factor for coronary heart disease mortality, especially sudden cardiac death . The omega-3 index
fulfills many of the requirements for a risk factor including consistent epidemiological evidence, a
plausible mechanism of action, a reproducible assay, independence from classical risk factors,
modifiability, and most importantly, the demonstration that raising tissue levels will reduce risk for cardiac
events. Due to this, the omega-3 index compares very favorably with other risk factors for sudden cardiac
death.
The increased intake of omega-3 PUFAs has been recommended by several health agencies and
professional organizations including the American Heart Association, the European Society for
Cardiology, and the Australian Health and Medical Research Council. These recommendations are
based on evidence from a number of reports linking dietary deficiency of long chain omega-3 PUFAs with
35
Calder P.C., et al., Proceedings of the Nutrition Society (2008) 67:409-418.
36
Goldberg R.J., et al., Pain (2007) 129:210-223.
37
Calder P.C., et al., Molecular Nutrition & Food Research (2008) 52,:885-897.
38
Calder P.C., et al., International Reviews of Immunology (2009) 28:506-534.
39
Calder P.C., et al., American Journal of Clinical Nutrition 83 (2006) 1505S-1519S.
40
Bloch, M.H., et al., Journal of American Academy of Child and Adolescent Psychiatry (2011) 50(10):991-1000.
41
Calder P.C., et al., Clinical Science (2004) 107:1-11.
42
Glass C.K., et al., Cell (2001) 104:503-516.
43
Ross R. New England Journal of Medicine (1999) 340:115-126.
44
Bucher H.C., et al., American Journal of Medicine (2002) 112:298-304.
45
Studer M., et al., Archives of Internal Medicine (2005) 165:725-730.
46
Cawood A.L., et al., Atherosclerosis (2010) 212:252-259.
47
Glass C.K., et al., Cell (2001) 104, 503-516.
48
De Lorgeril M. Sub-cellular Biochemistry (2007) 42:283-97.
49
Bunea R., et al., Alternative Medicine Review (2004) 9:420-428.
50
Sinclair A.J., et al., Allergy and Immunology (Paris) (2000) 32:261-71.
51
Harris W.S., et al., American Journal of Clinical Nutrition (2008) 87(6):1997S-2002S.
RODMAN & RENSHAW EQUITY RESEARCH 12
13. Neptune Technologies & Bioressources, Inc. April 25, 2012
a risk for cardiovascular events, notably sudden death. The FDA gave “qualified health claim” status to
EPA and DHA omega-3 PUFAs on September 8th, 2004.
Links between Omega-3 Fatty Acids and Cardiovascular Health
A meta-analysis of 13 cohorts including over 222,000 individuals followed for coronary heart disease
52
(CHD) death for an average of about 12 years has been performed . The authors found that the
consumption of only one fish meal per week (versus <1 per month) was associated with a statistically
significant 15% reduction in risk. When subjects were classified into categories of increasing fish
consumption (<1/month, 1–3/month, 1/week, 2–4/week, and ≥5/week), those in the highest intake group
enjoyed a 40% reduction in risk. Similar findings were reported for stroke. An inverse relation between
53 54
fish intake and risk for CHD has also been reported in Greek and in Japanese cohorts .
The largest and most well controlled intervention study carried out to date was the GISSI Prevenzione
study, which tested the hypothesis that relatively small intakes of omega-3 PUFAs (<1g) could reduce risk
for death from CHD in high risk patients. More than 11,000 postmyocardial infarction patients were
®
randomized to either one capsule of omega-3 FA ethyl esters (Omacor , 850 mg of EPA+DHA) or usual
care and then followed for 3.5 years. The risk for death from any cause was reduced by 20% and risk for
sudden death by 45% in the supplement group. This study will be discussed in further detail in the next
section of this report.
The relative reduction in risk for death from any cause in trials of anti-lipidemic drugs and lipid-lowering
55
diets was computed in a large meta-analysis . Over 137,000 patients receiving treatment for lipid
disorders were compared to controls in a total of 97 studies. There were 35 trials with statins (the
cholesterol-lowering drugs), seven studies with fibrates, eight with bile acid binding resins, 14 with
omega-3 fatty acids and 18 examining the effects of global dietary changes. Only two interventions were
associated with significant reductions in total mortality: statins (risk ratio 0.87, 95% CI 0.81-0.94) and
omega-3 fatty acids (risk ratio 0.77, 95% CI 0.63-0.94). One caveat to the omega-3 group is that it can
be argued that these were not strictly omega-3 studies but overall dietary interventions. In these two
studies, the active agent(s) cannot be identified with confidence because so many dietary variables
differed between groups. Nevertheless, the preponderance of the data suggests that for most individuals,
increasing the intake of long-chain omega-3 fatty acids is a safe and inexpensive way to significantly
reduce risk for CHD, especially sudden cardiac death.
GISSI Study
The Gruppo Italiano per lo Studiodella Sopravvivenza nell’Infarto miocardico (GISSI)-Prevenzione trial
studied the independent and combined effects of omega-3 PUFAs and vitamin E on morbidity and
mortality after myocardial infarction. This randomized, prospective study enrolled more than 11,000
patients, between October, 1993 and September, 1995, who had suffered myocardial infarction within the
last three months. Patients were randomized to receive of omega-3 PUFA (1g daily, n=2,836), vitamin E
(300mg daily, n=2,830), both (n=2,830), or placebo (control, n=2,828) for 3·5 years. The co-primary
endpoints were death, non-fatal myocardial infarction, and stroke.
The data showed that treatment with omega-3 PUFA significantly lowered the risk of co-primary endpoints
vs. placebo (relative risk decrease 10% [95% CI 1-18]). In contrast, vitamin E did not have a statistically
significant impact on the risk of these events. Treatment with both omega-3 PUFA and vitamin E had an
impact similar to that of omega-3 PUFA alone.
HYPERTRIGLYCERIDEMIA
Hypertriglyceridemia (hTG) is a common disorder in the U.S. It is exacerbated by uncontrolled diabetes
mellitus, obesity, and sedentary habits, all of which are more prevalent in industrialized societies than in
52
He K., et al., Circulation (2004) 109:2705-2711.
53
Panagiotakos D.B., et al., International Journal of Cardiology (2005) 102:403-409.
54
Iso H., et al., Circulation (2006) 113:195-202.
55
Studer M., et al., Archives of Internal Medicine (2005) 165: 725-730.
RODMAN & RENSHAW EQUITY RESEARCH 13
14. Neptune Technologies & Bioressources, Inc. April 25, 2012
developing nations. In both epidemiologic and interventional studies, hTG is a risk factor for coronary
disease.
Two rare genetic causes of hTG (lipoprotein lipase – LPL - deficiency and apolipoprotein – apo - C-II
deficiency) lead to triglyceride (TG) elevations that are astonishingly high. Counter-intuitively, these
genetic mutations do not confer an increased risk of atherosclerotic disease, which has fostered the
unfounded belief that high TGs are not a risk for that condition.
TG levels greater than 1000mg/dL increase the risk of acute pancreatitis. Hypertriglyceridemia is also
correlated with an increased risk of cardiovascular disease (CVD), particularly in the setting of low HDL-C
(high-density lipoprotein cholesterol, “good cholesterol”) levels and/or elevated LDL-C (low-density
lipoprotein cholesterol, “bad cholesterol”) levels. When low HDL-C levels are controlled for, some studies
demonstrate that elevated TGs do not correlate with risk of CVD. However, other studies suggest that
TGs are an independent risk factor. Since metabolism of the triglyceride-rich lipoproteins and metabolism
of HDL-C are interdependent and because of the labiality of TG levels, the independent impact of hTG on
CVD risk is difficult to confirm. However, randomized clinical trials using TG-lowering medications have
demonstrated decreased coronary events in both the primary and secondary coronary prevention
populations.
Epidemiology
If hypertriglyceridemia was defined as fasting TGs ≥200mg/dL, the prevalence in the U.S. is
approximately 10% in men older than 30 years and women older than 55 years. Prevalence of severe
hypertriglyceridemia, defined as TGs greater than 2,000mg/dL, is estimated to be to be 1.8 cases per
10,000 adult whites, with a higher prevalence in patients with diabetes or alcoholism. The frequency of
LPL-C deficiency is approximately one case per one million individuals, and that of apo C-II deficiency is
even lower. The frequency of LPL-C deficiency in Quebec, Canada is significantly higher than the single
case per million population reported in the U.S. Apo C-II has a worldwide distribution but is infrequent in
all population studies to date.
Extreme elevations of TGs, usually greater than 1,000mg/dL, may cause acute pancreatitis and all the
sequellae of that condition. A less severe, and often unrecognized, condition is the chylomicronemia
syndrome, which usually is caused by TG levels greater than 1,000 mg/dL. Chylomicronemia syndrome
is a disorder passed down through families in which the body does not break down lipids correctly. This
56
causes fat particles called chylomicrons to build up in the blood . TGs are lower in African Americans
compared to Caucasians.
In the Prospective Cardiovascular Munster study (PROCAM), a large observational study,
57
hypertriglyceridemia (TGs >200mg/dL) was more prevalent in men (18.6%) than in women (4.2%) . TGs
increase gradually in men until about age 50 years and then decline slightly. In women they continue to
increase with age. Mild hypertriglyceridemia (TGs >150mg/dL) is slightly more prevalent in men
beginning at age 30 years and women starting at age 60 years.
Medical Care
Although U.S. cardiologists and primary care physicians have typically concentrated on controlling
cholesterol, it is becoming increasingly common to assess triglyceride levels and regard them as an
important risk factor and key potential component of cardiovascular disease. When hTG is diagnosed,
secondary causes should be sought out and controlled. Direct treatment of elevated TGs should be
undertaken after aggravating conditions, such as uncontrolled diabetes mellitus, are controlled as well as
possible. In some cases, hTG will resolve completely when the other condition(s) are managed
successfully. These conditions include obesity, a sedentary lifestyle, and smoking. Thus, the initial
management of hTG should include weight reduction, increased physical activity, and elimination of
ingesting large concentrations of refined carbohydrates.
56
http://www.ncbi.nlm.nih.gov/pubmedhealth/PMH0001442/
57
Assmann G., et al., European Journal of Clinical Investigation (2007) 37: 925-932.
RODMAN & RENSHAW EQUITY RESEARCH 14
15. Neptune Technologies & Bioressources, Inc. April 25, 2012
If the secondary conditions that raise TG levels cannot be managed successfully and if TGs are 200-
499mg/dL, the non-HDL cholesterol becomes the initial target of drug therapy using LDL-lowering
medication, such as statins. The non-HDL cholesterol is the sum of the LDL and the VLDL cholesterol
(total cholesterol - HDL). The goals for non-HDL-C levels, similar to the goals for LDL-C levels, are
dependent on risk and are 30mg/dL higher than the corresponding LDL-C goals. If secondary conditions
are not present, no specific care is required other than treatment to improve hTG. The importance of
obesity, a sedentary lifestyle, and a deconditioned state should not be underestimated in the treatment of
hTG. It is important to point out that approximately 25% of patients prescribed statins abandon the
treatment within six months due to unpleasant side effects. Muscle complaints constitute the major
symptom limiting the use of statins. The clinical features of statin myopathy include symptoms such as
58
muscle aches or myalgia, weakness, stiffness, and cramps .
®
Preclinical and initial clinical testing have shown NKO to be beneficial in LDL and triglyceride reduction
59
as well as HDL elevation, all of which are essential in treating chronic cardiovascular conditions .
®
WHY NKO , WHY KRILL?
Over the last years, natural health products have gathered attention and support of both science and
industry. The growing incidence of adverse events with synthetic drugs has given rise to a demand for
effective and safe alternative treatments. Frequently, traditional medicine represents a tradeoff between
efficacy and side effects. The small number of natural health ingredients that have been carefully
researched for safety and efficacy and have passed both peer and regulatory scrutiny could alleviate the
®
problem. In our view, NKO could fulfill these criteria by supporting solid scientifically validated research
providing safety and efficacy.
The Norwegian word “krill” translates into “young fry of fish” and has been adopted as the term used to
describe marine crustaceans belonging to the order Euphausiacea. Krill is broadly known as whale food,
but is also a source of food for seals, squid, fish, seabirds, and, to a much lesser extent, humans. In
60
appearance, krill resembles shrimp (Exhibit 8) .
Exhibit 8: Krill Photograph - Body Structure
Stomach
Hepatopancreas
Heart
Intestine
Tail
Meat
GILLS
Highest
proteolytic
Lowest proteolytic activity activity
Source: Tou J.C., et al., Nutrition Reviews (2007) 65(2):63-77.
58
Mancini G.B.J., et al., Canadian Journal of Cardiology (2011) 27:635-662.
59
Bunea R, et al., Alternative Medicine Review (2004) 9:420-428.
60
Torres J.A., et al., in: Shahidi F., ed. Maximising the Value of Marine By-Products. Cambridge (UK) (2007):65-95.
RODMAN & RENSHAW EQUITY RESEARCH 15
16. Neptune Technologies & Bioressources, Inc. April 25, 2012
61
Krill range in size from 0.01 to 2g wet weight and from 8mm to 6cm length . Despite their small size, krill
are capable of forming large surface swarms that may reach densities of over one million animals per
62
cubic meter of seawater , making them an attractive species for harvesting. Furthermore, krill are found
in all oceans of the world, making them among the most heavily populated animal species. Despite this
abundance, the commercial harvest of krill has mainly focused on its use as feed in aquariums,
63
aquaculture, and sport fishing . From the different species of krill, only Antarctic krill (Euphausia
superba) and Pacific krill (Euphausia pacifica) have been harvested to any relevant level for human
consumption. The underutilization and abundance of krill make it a quite unexploited food source for
humans that, when coupled with a conscientious ecosystem approach to managing krill stocks, should
result in its long-term sustainability.
Krill Nutritional Value
Foods high in saturated fatty acids (SFAs) have been linked to increased risk of CVD, whereas the
64
omega-3 PUFAs, particularly EPA and DHA, have been linked to reduced risk of CVD . Hence, the
nutritive value of krill oil was evaluated due to the consumer appeal for foods that are low in fat and SFAs
and high in omega-3 PUFAs.
65
Saether et al,. analyzed the lipid content of three species of krill and reported values ranging from 12%
to 50% on a dry-weight basis. The wide range in lipid content was attributed to seasonal variations. A
drop in lipid content occurred in the spring, when food was scarce, whereas it rose in the autumn and
66
early winter, when food was abundant. Kolakowska reported that the lack of reproductive activity in the
winter raises the lipid content of female krill to over 8% of their wet weight. Therefore, the lipid content
and profile of krill may vary significantly upon factors such as season, species, age, and the lag time
between capture and freezing. It is important to account for these factors when evaluating the
consistency of krill oil. Apart from this variability, krill is similar to other seafood in being low in fat
compared with other animal foods.
The lipid content in krill was analyzed for fatty acid composition. Exhibit 9 shows that krill provides both of
the essential fatty acids: α-linolenic acid (ALA) and linoleic acid (LA). Moreover, krill is low (26.1%) in
both SFAs and (24.2%) monounsaturated (MUFAs) but high (48.5%) in PUFAs. The PUFAs consist
mainly of omega-3 fatty acids. Kolakowska et al., described that omega-3 PUFAs account for
67
approximately 19% of total fatty acids in Antarctic krill caught during the winter . Of the omega-3 PUFAs,
EPA and DHA are remarkably abundant. This is not surprising given that krill feed on marine
phytoplankton such as single-cell microalgae, which synthesize large amounts of EPA and DHA.
As shown in Exhibit 9, the DHA content of krill is equivalent to that of shrimp and fish, but its EPA content
is higher than either lean or fatty fish.
61
Nicol S., et al., Krill Fisheries of the World. FAO Fisheries Technical Paper (1997) 367.
62
Hamner W.M., et al., Science (1983) 220:433-435.
63
Nicol S., et al., In: Everson I, ed. Krill: Biology, Ecology and Fisheries (2000):262-283.
64
Hu F.B., et al., Journal of American College of Nutrition (2001) 20:5-19.
65
Saether O., et al., The Journal of Lipid Research (1986) 27:274-285.
66
Kolakowska A. Polish Polar Research (1991) 12:73-78.
67
Kolakowska A. Polish Polar Research (1991) 12:73-78.
RODMAN & RENSHAW EQUITY RESEARCH 16
17. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 9: Lipid Content and Fatty Acid Composition of Krill, Shrimp, Trout and Salmon
Source: Source: Tou J.C., et al., Nutrition Reviews (2007) 65(2):63-77.
The fatty acid profile of krill resembles that of shrimp and fish, with krill containing a higher amount of
PUFAs. However, it is important to observe that most of the fatty acids in fish are incorporated into
68
triglycerides, whereas 65% of the fatty acids in crustaceans are incorporated into phospholipids . Animal
and human studies suggest that omega-3 PUFAs bound to phospholipids, such as those found in krill oil,
have superior absorption and release to the brain than their methyl-ester or triglyceride-formed fish
69,70
counterparts .
Is There Enough Omega-3 Fatty Acids in Nutraceuticals?
Omega-3 molecules have a unique impact on TGs. In large amounts (≥10g/d), omega-3 fatty acids can
lower TGs by 40% or more. In order to achieve this dose, purified capsules usually are necessary.
Previously, patients have sometimes elected to intake omega-3 fatty acids by increasing their
consumption of fatty fish. Those fish highest in omega-3 fatty acids are sardines, herring, and mackerel.
To achieve ideal omega-3 levels, daily servings of one pound or more may be necessary. However, if
weight gain ensues, TG-lowering will be compromised.
The utility of omega-3 fatty acid products has recently been brought into focus by consumer reports
highlighting the quality control issues plaguing some omega-3 fatty acid supplements. In one example,
th
the Consumer Council of Hong Kong disclosed in a report dated October 16 , 2008 that it had discovered
significant discrepancies between the claimed and actual contents of the omega-3 fatty acids DHA and
71
EPA in a range of nutraceutical products on the Hong Kong market .
68
Weihrauch J.L., et al., Journal of the American Oil Chemists’ Society (1977) 54:36-40.
69
Goustard-Langelier B., et al., Lipids (1999) 34(1):5-16.
70
Maki K.C., et al., Nutritional Research (2009) 29(9):609-615.
71
Consumer Council of Hong Kong (http://www.consumer.org.hk/website/ws_en/news/press_releases/p38401.html).
RODMAN & RENSHAW EQUITY RESEARCH 17
18. Neptune Technologies & Bioressources, Inc. April 25, 2012
The test that formed the basis of the report analyzed 21 fish oil and seven fish liver oil products to assess
their fatty acid content (along with vitamin A and D content in the fish liver oil products), as well as the
levels of possible contaminants. Given the proven health benefits of DHA and EPA, fish oil products
often prominently advertise their omega-3 content.
Except for five liver oil supplements, all samples (23) were duly labeled with claims on the levels of DHA
and EPA in the products. The test found that a number of samples, however, contained DHA and EPA
levels that were significantly lower than their claims. In the most notable case, a fish liver oil supplement
was revealed to be as much as 88% short of the level of EPA it claimed. The EPA test result on the
product indicated an amount of 29.6mg per capsule compared with 240mg each stated on its label. In
another sample, the DHA result of 26mg per capsule fell also 71% short of the claimed value of 90mg in
each capsule.
72
In some samples, trans fat was also detected (the sample with the highest amount had 40.6mg per
73
capsule), and saturated fat (the highest amount was 372mg per capsule). Taking into account both the
test result (of the highest amount reached) and the maximum recommended dosage, one could take in at
a maximum an amount of 162mg of trans fat daily, or 7.4% of the limit recommended by WHO/FAO. In
the case of saturated fat, using the same calculation, one may consume a maximum amount of 1,488mg
saturated fat daily, or 6.7% of the recommended WHO/FAO limit.
Further, the fish liver oil samples were analyzed for contents of vitamins A and D. The results closely
followed the claims on the label except for one sample, which was found to contain an amount of vitamin
D 37% lower than its claim. On the test to identify the presence of contaminants such as heavy metals,
pesticides and industrial wastes polychlorinated biphenyls (PCB), the results were generally satisfactory,
especially in pollutants.
The Consumer Council subsequently referred its test findings on such label discrepancies to the
authorities concerned for follow-up action. Further, as part of the study, the Consumer Council also
sought the comments of medical professionals on the health claims of fish oil and fish liver oil dietary
supplements. In their opinion, the experts all agreed that the consumption of fish and fish oil could
alleviate one's cardiovascular problems. Scientific evidence has shown that intake of omega-3 fatty acids
could lower blood pressure, reduce blood triglyceride levels and assist in preventing cardiovascular
diseases.
However, the experts warned that excessive intake of omega-3 fatty acids could lead to gastrointestinal
problems and higher risk of bleeding. The daily recommended intake limit is a total of 3g of DHA and
EPA. Further, excessive intake of vitamins A and D could also lead to liver problems. The daily limit of
vitamins A and D are respectively 10,000 IU and 2,000 IU. The limits for children, pregnant and lactating
women should be lower. For pregnant and lactating women, it was stated that it is not considered
necessary for them to consume vitamin A and D rich fish liver oil products if their physicians have already
prescribed multi-vitamins.
Neptune maintains a quality-assurance process that is QMP certified by the Canadian Food Inspection
®
Agency (CFIA) to manufacture NKO . Additionally, the company has obtained Good Manufacturing
Practices accreditation from Health Canada.
POTENTIAL MULTIPLE BENEFITS
®
Neptune Krill Oil (NKO ) is extracted with a patented GMP-accredited process from Antarctic Krill
74
(Euphasia superba), which is considered the most abundant biomass in the planet .
72
Trans fats (or trans fatty acids) are created in an industrial process that adds hydrogen to liquid vegetable oils to make them more
solid. Trans fats raise your bad (LDL) cholesterol levels and lower your good (HDL) cholesterol levels.
73
Eating foods that contain saturated fats raises the level of cholesterol in your blood.
74
Kock K.H., et al., Philosophical Transactions of the Royal Society of London Series B Biological Sciences (2007)
29;362(1488):2333-2349.
RODMAN & RENSHAW EQUITY RESEARCH 18
19. Neptune Technologies & Bioressources, Inc. April 25, 2012
®
NKO is distinct from other marine oils in that the omega-3 fatty acids are attached to phospholipids,
75
which due to their amphiphilic nature, act as superior delivery systems. Furthermore, naturally inherent
potent antioxidants such as astaxanthin, attached to omega-3, confer additional stability and antioxidant
®
strength. NKO has been scientifically proven to be safe for chronic use and effective for the
management of dyslipidemia, chronic inflammatory conditions and cognitive disorders.
Phospholipids – Life Building Blocks
Phospholipids are integral to the construction of cell membranes and work cooperatively with omega-3
and antioxidants (see Exhibit 4, Page 9) to assist a variety of processes essential to life.
®
The majority of EPA and DHA present in NKO are structurally attached to phospholipid molecules, in the
®
same manner they appear in human cell membranes. By weight, NKO is comprised of at least 30%
EPA and DHA and 40% phospholipids, mostly in the form of phosphatidylcholines. The EPA and DHA in
fish oil are in the form of tryacylglicerols. As we previously discussed, it has been demonstrated that
essential fatty acids in the form of phospholipids are superior to those in the form of tryacylglycerols in
76
increasing the bioavailability EPA and DHA .
Comparison of animal and human studies demonstrated the absorption of phospholipid-bound long-chain
PUFAs is superior to non-phospholipid fish oils. A primate study demonstrated that twice as many
77
phospholipid-bound FAs accumulate in the brain compared to triglyceride-bound FAs .
A human trial analyzing the response of both overweight and obese patients to long-chain fatty acid
supplementation demonstrated that daily doses of 216mg EPA and 90mg DHA from krill oil provided
more profound fatty acid elevations than daily doses of 212mg EPA and 178mg DHA derived from fish oil.
At the end of the four-week trial, mean plasma EPA levels were 377µmol/L in the krill oil group, as
opposed to 293 µmol/L in the fish oil group. Although the krill oil supplement provided half as much DHA
as the fish oil, the plasma DHA was 476µmol/L in the krill oil group, compared to 478µmol/L in the fish oil
78
group at the end of this one-month trial .
Astaxanthin – Potential Antioxidant and Anti-Inflammatory Effects
Astaxanthin, a member of the carotenoid family, is an oxygenated reddish pigment present in microalgae,
fungi, complex plants, seafood, flamingos and quail. It gives salmon, trout, and crustaceans such as
79
shrimp, krill and lobster their distinctive reddish coloration . It is an antioxidant with anti-inflammatory
properties, which has been studied as a potential therapeutic agent in atherosclerotic cardiovascular
80 81
disease and renal transplantation .
Humans and other animals cannot synthesize them and therefore are required to source them in their
82
diet . Carotenoids are classified, according to their chemical structure, into carotenes and xanthophylls.
Astaxanthin, which is a xanthophyll, contains two oxygenated groups on each ring structure (Exhibit 10),
83
which is responsible for its enhanced antioxidant features .
75
Chemical compound possessing both hydrophilic (water-loving, polar) and lipophilic (fat-loving) properties.
76
Cansell M., et al., Lipids (2003) 38(5):551-559.
77
Wijendran V., et al., Pediatric Research (2002) 51(3):265-272.
78
Maki K.C., et al., Nutritional Research (2009) 29(9):609-615.
79
Hussein, G.; et al., Journal of Natural Products (2006) 69:443-449.
80
Fasset R.G., et al., Marine Drugs (2011), 9:447-465.
81
Fasset R.G., et al., BMC Nephrology (2008) 9:17.
82
Sandmann, G. European Journal of Biochemistry (1994) 223:7-24.
83
Guerin, M.; et al., Trends in Biotechnology (2003) 21, 210-216.
RODMAN & RENSHAW EQUITY RESEARCH 19
20. Neptune Technologies & Bioressources, Inc. April 25, 2012
Exhibit 10: Molecular Structure of Astaxanthin
Source: Fasset R.G., et al., Marine Drugs (2011) 9:447-465.
In 1987, the FDA approved astaxanthin as a feed additive for use in the aquaculture industry and in 1999
84
it was approved for use as a dietary supplement (nutraceutical) .
Certain marine species, such as shrimp, have a limited capacity to convert closely related carotenoids
®
into astaxanthin. The presence of this antioxidant in NKO creates a natural protection against oxidation
®
of the oil. Independent analysis performed at Brunswick Laboratories with NKO and published literature
85
suggest that astaxanthin is significantly more effective as antioxidant than vitamin E .
Astaxanthin can reduce free radicals and protect the cell membrane phospholipids against free radical
damage. When measuring the oxygen radical absorbance (ORAC) – a measure of a compound’s ability
®
to block free radicals, NKO was 48 times more effective than fish oil and 34 times more effective than
86
coenzyme Q10 .
Oral supplementation with astaxanthin in studies in healthy human volunteers and patients with reflux
esophagitis demonstrated a significant reduction in oxidative stress, hyperlipidemia and biomarkers of
inflammation. In a study involving 24 healthy volunteers who ingested astaxanthin in doses from 1.8 to
21.6mg/day for two weeks, the LDL lag time, as a measure of susceptibility of LDL to oxidation, was
87
significantly greater in astaxanthin treated participants indicating inhibition of the oxidation of LDL .
Plasma levels of 12- and 15-hydroxy fatty acids were significantly reduced in 40 healthy non-smoking
88
Finnish males given astaxanthin suggesting astaxanthin decreased the oxidation of fatty acids. The
effects of dietary astaxanthin in doses of 0, 2 or 8mg/day, over eight weeks, on oxidative stress and
89
inflammation were investigated in a double blind study in 14 healthy females . Although these
participants did not have oxidative stress or inflammation, those taking 2mg/day had lower C-reactive
90
protein (CRP) at week eight. There was also a decrease in DNA damage measured using plasma 8-
hydroxy-2′-deoxyguanosine after week four in those taking astaxanthin. Astaxanthin therefore appears
safe, bioavailable when given orally and is suitable for further investigation in humans.
Moreover, the safety, bioavailability and effects of astaxanthin on oxidative stress and inflammation that
have relevance to the pathophysiology of atherosclerotic cardiovascular disease, have been assessed in
a small number of clinical studies. No adverse events have been reported and there is evidence of a
reduction in biomarkers of oxidative stress and inflammation with astaxanthin administration.
Experimental studies in several species using an ischemia-reperfusion myocardial model demonstrated
that astaxanthin protects the myocardium when administered both orally or intravenously prior to the
91
induction of the ischemic event .
84
Guerin M.; et al., Trends in Biotechnology (2003) 21, 210-216.
85
Naguib Y.M., et al., Journal of Agricultural and Food Chemistry (2000) 48:1150-1154.
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Massrieh W. Lipid Technology (2008) 20(5):108-111.
87
Iwamoto T.; et al., Journal of Atherosclerosis and Thrombosis (2000) 7:216-222.
88
Karppi J.; et al., International Journal of Vitamine and Nutrition Research (2007):77:3-11.
89
Park J.S.; et al., Nutrition & Metabolism (2010) 7:18.
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Protein found in the blood, the levels of which rise in response to inflammation (it is an acute phase protein).
91
Fasset R.G., et al., Marine Drugs (2011) 9:447-465.
RODMAN & RENSHAW EQUITY RESEARCH 20
21. Neptune Technologies & Bioressources, Inc. April 25, 2012
A double-blind randomized placebo-controlled clinical trial (Xanthin study by Fasset et al.) is currently
being conducted to assess the effects of astaxanthin 8mg orally day on oxidative stress, inflammation and
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vascular function in patients that have received a kidney transplant . Patients in the study undertake
measurements of surrogate markers of cardiovascular disease including aortic pulse wave velocity,
augmentation index, brachial forearm reactivity and carotid artery intima-media thickness. Depending on
the results from this pilot study a large randomized controlled trial assessing major cardiovascular
outcomes such as myocardial infarction and death may be warranted.
Experimental evidence suggests astaxanthin may have protective effects on cardiovascular disease when
administered prior to an induced ischemia-reperfusion event. In addition, there is evidence that
astaxanthin may decrease oxidative stress and inflammation which are known accompaniments of many
diseases.
The unique molecular composition of krill oil, which is rich in phospholipids, omega-3 fatty acids, and
diverse antioxidants, seems to surpass the profile of fish oils and may offer a superior approach toward
the reduction of risk for cardiovascular disease.
®
NKO and Hyperlipidemia
® 93
In a recent study, the effect of NKO on hyperlipidemia was investigated . In this double-blind trial, 120
male and female subjects (mean age of 51±9.5 years) diagnosed with mild to high blood cholesterol (194-
348mg/dL) and triglycerides (204-354mg/dL) were enrolled. Subjects were randomly assigned to one of
the following treatment groups:
2
(A) low-dose krill oil: 1g/d if body mass index (BMI) was under 30kg/m and 1.5g/d if BMI was
2
over 30 kg/m
2 2
(B) high-dose krill oil: 2g/d if BMI was under 30kg/m and 3g/d if BMI was over 30kg/m
(C) 3g/d of fish oil containing 180 mg EPA and 120 mg DHA
(D) placebo containing microcrystalline cellulose
Assigned treatments were given daily for 12 weeks. The primary endpoints measured were total
cholesterol, triglycerides, LDL, and HDL at baseline and at 90 days. Fasting blood lipids and glucose
were analyzed at baseline as well as 30 and 90 days after study initiation for all groups, and at 180 days
for the 30 patients in Group B.
After 12 weeks of treatment, patients receiving 1g or 1.5g krill oil daily had a 13.4% and 13.7% decrease
in mean total cholesterol, from 236mg/dL and 231mg/dL to 204mg/dL (p=0.001) and 199mg/dL (p=0.001),
respectively (Exhibit 11).
Exhibit 11: Results of Krill Oil (1g and 1.5g/day) on Lipids
1g Krill Oil mg/dL % Change p-value 1.5g Krill Oil mg/dL % Change p-value
Time (days) 0 90 Time (days) 0 90
Total Cholesterol 235.83 204.12 -13.44% 0.001 Total Cholesterol 231.19 199.49 -13.71% 0.001
LDL 167.78 114.05 -32.03% 0.001 LDL 164.74 105.93 -35.70% 0.001
HDL 57.22 82.35 43.92% 0.001 HDL 58.76 83.89 42.76% 0.001
Triglycerides 120.50 107.21 -11.03% 0.114 Triglycerides 126.7 111.64 -11.89% 0.113
Source: Bunea R., et al., Alternative Medicine Review (2004) 9:420-428.
The group of patients treated with 2g or 3g krill oil showed a significant respective reduction in mean total
cholesterol of 18.1% and 18%. Levels were reduced from a baseline of 247mg/dL and 251mg/dL to
203mg/dL (p=0.001) and 206mg/dL (p=0.001), correspondingly (Exhibit 12).
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Fassett R.G.; at al., BMC Nephrology (2008) 9(17).
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Bunea R., et al., Alternative Medicine Review (2004) 9:420-428.
RODMAN & RENSHAW EQUITY RESEARCH 21
