Nestle, on health kick, moves into milk allergy testing

[May 31, 2016]  By Ben Hirschler

LONDON (Reuters) - Nestle, the world's biggest food company, is stepping up its push into medicine with a global deal worth up to 100 million euros ($111 million) to develop and market an experimental milk allergy test for infants.

The Swiss group will pay DBV Technologies 10 million euros upfront for rights to its skin patch test for cow’s milk protein allergy (CMPA), with the balance depending on successful development, the two companies said on Tuesday.

Shares in the French biotech company rose 5 percent on the news.

The deal underscores Nestle's ambitions for its Health Science division, which it believes could eventually generate more than 10 billion Swiss francs ($10 billion) in annual sales.

It also complements the company's market-leading infant formula business and could help lift sales of products designed for babies with food intolerance.

Nestle has signed a series of similar deals with other small companies in its bid to create a new kind business that is midway between food and pharmaceuticals. The goal is to find new ways to treat, diagnose and prevent a range of diseases, from gastrointestinal problems to Alzheimer's.

CMPA affects up to 2 or 3 percent of infants and toddlers, according to the companies. Many others, however, have symptoms suggestive of the condition, creating a need for a simple diagnostic test.

Under the terms of the agreement, DBV will be eligible to receive up to 90 million euros in development, regulatory and commercial milestones - on top of the upfront payment - and will also collect royalties on eventual product sales.

“This innovation can become the breakthrough diagnostic for CMPA," said Greg Behar, chief executive of Nestlé Health Science.

The new test will need to go through extensive clinical trials before it is cleared for sale and DBV expects it to be submitted for approval to regulators worldwide by 2021.

Behar's division, which employs around 3,000 people, is an expanding part of Nestle's operations.

Given aging populations around the world and spiraling cases of lifestyle diseases, the Swiss group sees big opportunities in health - but the initiative also poses new challenges by taking it into the highly regulated medical field.

Strategically the shift towards health offers Nestle a hedge against slowing growth in packaged foods and may also offset crackdowns on unhealthy foods blamed for obesity and other lifestyle problems.

The milk allergy test dovetails with Nestle's presence in infant formula, where it had 22 percent of the market in 2015, according Euromonitor International. It already has a range of products called Althera, Alfare and Alfamino that are designed for infants allergic to cow’s milk.

For DBV, the deal is a vindication of its Viaskin patch technology. The company also has a patch to treat peanut allergy in clinical trials, as well as an earlier-stage program for egg allergy.

($1 = 0.8994 euros)

($1 = 0.9938 Swiss francs)

(Additional reporting by Martinne Geller; Editing by Jason Neely and Mark Potter)

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